There is a clear method of removing PMI: you need to get at least 20% equity in your home. Most lending institutions require a borrower to maintain a mortgage insurance policy until they own at least 20% of their home; once you reach that mark you can request the policy be cancelled. By law banks are required to end the policy automatically once you reach 22% equity in your home.
There are a few other ways your equity could potentially rise enough that you will no longer have to pay for PMI. The most obvious would be if your home value has appreciated enough that you have 20% equity. If you think you are getting close, it could be worth your time to check and see if property values have risen enough in your area. If you have made home improvements since you purchased it, the added value might also push up your equity. Lenders will not accept estimates unfortunately, you will have to get your home appraised at your expense to establish it’s market value.
Another method of getting rid of PMI is to use a home equity loan or line of credit to pay off enough of your mortgage to get to 20% equity. Many borrowers keep two mortgages on their home, and it is not uncommon anymore to take out a second mortgage of some sort to pay down a portion of your original loan.
Last you could borrow the money from family or friends to get yourself to 20% equity. It’s not unheard of for parents or family members to simply give someone a gift for such purposes, though you would have to be lucky to get it free and clear.
After you reach 20% equity, you should be proactive about cancelling the policy. Make a request in person or send your bank a certified letter asking for the policy to be removed. Even after reaching 22% some lenders might not immediately follow their requirement to cancel PMI, and it is your responsibility to ensure it is cancelled in a timely manner. Just make sure that you are close to the 20% equity threshold before you opt for a new appraisal, since you will be the one paying for it.
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