If you have an FHA loan or put less than 20 percent down when you bought your home, you’re probably stuck with PMI, or Private Mortgage Insurance.
PMI is paid monthly as part of your mortgage payment, but unlike your balance and interest, it doesn’t decline over time. You pay the same for mortgage insurance month after month, year after year until you get rid of it.
And those costs can really rack up over time. According to estimates, if you’ve got a $200,000 home and a credit score between 680 and 719, you’ll likely pay just under $1,800 per year in PMI.
Fortunately, you don’t have to pay for PMI forever. There are a few routes you can take to rid yourself of the dreaded PMI and lower your monthly mortgage payment for good.
You can request your PMI be canceled.
If your remaining mortgage balance is 80 percent or less of your home’s original appraised value, you can contact your lender and request a PMI cancellation. Each lender typically has their own form or process for doing this, so make sure to contact your lender directly to get the exact steps you’ll need to follow.
You can get a new appraisal.
Think home values may have appreciated in your area? Get a new appraisal. If your value is higher than originally estimated, you may end up qualifying for PMI cancellation based on your new equity balance. Keep in mind though: an appraisal will likely run you a few hundred bucks to complete.
You can remodel.
By the same token, you may be able to increase your value by remodeling or upgrading your home. Then, request that new appraisal, and you very well may have enough equity in the property to cancel your PMI immediately.
You can refinance.
If current mortgage rates are lower than what you bought your home for, you can refinance your loan and lower your monthly payment. If your new loan is 80 percent or less of your home’s value, you won’t need PMI from here on out.
Lenders are required to cancel PMI automatically once you’ve paid your mortgage down to 78 percent of your home’s value. Depending on your loan, that could be just around the corner or years away, so make sure to consider all your options before moving forward.