Private mortgage insurance or PMI allows individuals to purchase their home with less than a 20% down payment. This type of insurance protects the lender or investor against loss if a borrower stops making payments. However, PMI does not protect a homeowner against loss. It’s important for you to keep in contact with the lending institution who collects your monthly payments so you can inquire about this type of insurance and the requirements necessary to have it cancelled. Homeowners often mistakenly pay this insurance years after it’s no longer needed, and as a result, end up paying thousands in useless insurance premiums.
Homes purchased with a down payment of at least 20% should have enough equity to cover any potential losses by the lender, so PMI in that situation is generally not required. There has been a surge in the mortgage insurance industry because of the popularity of purchasing homes with less than 20% down. It has been claimed that because of mortgage insurance making up for the down payment difference, over 15 million Americans have been able to purchase homes over the past four decades.
If your home was purchased using conventional financing and you paid less than 20% down, it’s likely that you’re paying PMI. Now, the question that you need to ask yourself is; “Is it time to stop paying my monthly PMI and start putting that money into more useful things?’.
Although mortgage insurance may have allowed you to purchase a home, there will come a time when this added monthly expense will not be needed. Therefore, it would be in your best interest to keep the provisions surrounding it’s cancellation in mind because no one is going to cancel it for you. You are, ultimately, your own financial advisor, and even the smallest expenses should be eliminated if at all possible. By continuing to carry PMI which is no longer required, nor needed, it only decreases the amount of money you have available in your pocket or your bank account.
Here’s the good news that many homeowners don’t realize – Once you’ve reached 20% equity (or 25% depending on your lender) in your home by appreciation, 
improvements made to the home or by paying down the principal balance of the mortgage (or any combination of the three), you can have the lender cancel the private mortgage insurance. All you have to do is request in writing that the private mortgage insurance be canceled (most lenders have a brief form which must be filled out) and provide the lender with proof of sufficient equity over whatever percentage is in your documents.
Recent legislation (the Homeowners Protection Act) requires servicing lenders to make homeowners aware of the existence of any PMI they might be paying for and the requirements necessary to have it cancelled. Fortunately, you don’t have to wait for the lender’s notification to rid yourself of PMI. In most cases, if you have equaled your predetermined equity or more you’ll be able to cancel it almost immediately. Keep in mind though that every loan servicing institution can have different policies regarding this procedure. Ask your servicing lender to provide in writing their specific requirements to cancel PMI insurance.
Most lenders require a real estate appraisal by a state certified appraiser as the primary proof required to eliminate unnecessary PMI insurance. Here at Appraisal Services, we specialize in helping people, just like you, rid yourself of unwanted PMI insurance. Give us a call today at 702-2403-235 for answers to any questions you may have and start putting that money back in your pocket, not the bank’s! You can also leave us a message by clicking HERE.