Can You Remove PMI From Your Mortgage? (2024)

FAQs

Can PMI be removed if home value increases? ›

Yes. If your home value increases — either by housing market trends or by you investing to upgrade the property — you may be eligible to request a PMI cancellation. You'll likely need to pay for a home appraisal to verify the new market value, but that cost can be well worth it to avoid more PMI payments.

Yes. You have the right to ask your servicer to cancel PMI on the date the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. The first date you can make the request should appear on your PMI disclosure form, which you received along with your mortgage.

Timely payments count when it comes to getting rid of PMI. Late payments can put you in a high-risk category, making canceling harder. No other liens. Your mortgage must be the home's only debt, including second mortgages, home equity loans and lines of credit.

With borrower-paid PMI, the premiums are part of your monthly mortgage payment. You'll be able to stop paying them once you reach 20 percent equity in your home — if you request cancellation — or automatically when your mortgage balance reaches 78 percent of your home's value.

Yes, a lender can refuse to remove PMI. For instance, if your property does not appraise as expected or you do not satisfy a requirement, a lender can reject your request. However, if you meet the requirements, you can request the removal of PMI.

If you stay current on your mortgage payments, your PMI will automatically go away once your LTV ratio reaches 78% or your mortgage term has reached the halfway point. You can also eliminate the PMI early through other methods, such as refinancing or requesting cancellation from your lender once you reach 20% equity.

It applied the deduction to policies issued in the 2007 tax year going forward. The measure has been periodically renewed, but expired after the 2021 tax year. Currently, PMI is not deductible for the 2022 or later tax years.

It's common for homeowners to mistakenly think that PMI will cover their mortgage payments if they lose their job, become disabled, or die. But this belief isn't correct. PMI is designed to protect the lender, not the homeowner.

The Homeowners Protection Act of 1998 became effective in July 1999. The act, also known as the PMI Cancellation Act, addresses the difficulties homeowners have experienced in canceling pri- vate mortgage insurance (PMI) coverage.

Borrower-Paid Mortgage Insurance

You can't cancel your PMI until you have at least 20% equity in your property. Continue to make payments on your loan each month.

Do you ever get PMI back? ›

When PMI is canceled, the lender has 45 days to refund applicable premiums. That said, do you get PMI back when you sell your house? It's a reasonable question considering the new borrower is on the hook for mortgage insurance moving forward. Unfortunately for you, the seller, the premiums you paid won't be refunded.

Paying private mortgage insurance adds to your monthly mortgage payment, but it doesn't have any negative effects beyond costing you some extra cash. On the plus side, PMI can allow you to buy a home — and begin building home equity — more quickly than if you waited until you saved up a 20% down payment.

Equity. One path to removing PMI from your mortgage without refinancing is to build up the equity in your home. In this case, your PMI can be automatically removed when you reach a certain amount of equity. Equity is calculated by subtracting the amount you owe on your mortgage from the appraised value of your home.

If you buy a $300,000 home, you could be paying somewhere between $600 – $6,000 per year in mortgage insurance. This cost is broken into monthly installments to make it more affordable. In this example, you're likely looking at paying $50 – $500 per month.

To request cancellation of PMI, you should contact your loan servicer when the loan balance falls below 80 percent of your home's original value (the contract sales price or the appraised value of your home at the time it was purchased).

Using a New Home Appraisal to Remove PMI

Utilizing an updated appraisal allows homeowners to determine if their property value has increased enough. By tapping into a new home appraisal, individuals can work towards eliminating PMI by showcasing their property's value growth.

Loan-to-value ratio (LTV) is the measure lenders use to determine whether you need to have PMI. It's based on how much you owe on your mortgage and your home's value—either the sale price or the appraised value at the time of purchase, whichever is less.

For loans that are less than two years old, there must be substantial improvements made to the home that increased the value in order to use the current market value. “Substantial improvements” are renovations that substantially improved the property value or substantially extended the useful life of the home.