Can You Remove PMI From Your Mortgage? (2024)

FAQs

Can You Remove PMI From Your Mortgage? ›

You can typically remove PMI if market conditions lead to a significant increase in your home's value. You have to make a request with your lender and order a new appraisal. The appraisal confirms your property value rose enough to where you own the required amount of equity.

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.

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.

In most cases, removing mortgage insurance is a good thing. It will lower your monthly payment. Just remember to do some research before you make a decision. Depending on how you remove your mortgage insurance, you may have to consider other factors, such as refinancing expenses.

Most lenders require that your LTV ratio be 80% or lower before they will cancel your PMI. Note: Some lenders express the percentage in reverse, requiring at least 20% equity in the property, for example.

Increase Your Home's Value and Get an Appraisal

Contact your loan servicer if you think this may be the case. Lenders might be willing to cancel your PMI if you have 20% equity based on the home's current value. However, you may need to pay for a home appraisal first.

Many lenders (like Fannie Mae) also require a two-year “seasoning requirement,” meaning you can't have PMI removed until you've made two years' worth of on-time payments—even if your equity has grown above 20%. If it's been less than five years, you might even be required to have 25% worth of equity.

You can request PMI cancellation before it automatically terminates — when the principal loan balance reaches 80% of the home's original value (the date you're expected to reach 80% should be listed on your PMI disclosure form or provided by your lender).

As long as an appraisal shows you are at an 80% LTV or lower, you can stop paying PMI.

Is PMI a tax write off? ›

No, private mortgage insurance isn't tax-deductible. The mortgage insurance deduction was made available again for eligible homeowners for the 2018, 2019, 2020 and 2021 tax years. It has not been renewed for the 2022 and 2023 tax years.

No matter how much you borrow with an FHA loan, the upfront mortgage insurance premium totals 1.75 percent of that amount. You can pay this premium all at once at closing or add it to your mortgage and pay it over time. If you choose the latter, you'll pay interest on this cost, adding to your overall expense.

PMI is arranged by the lender and provided by private insurance companies. It insures the lender against loss caused by borrowers failing to make loan payments. Make no mistake: If you fall behind on your mortgage payments, PMI does not protect you and you can still lose your home through foreclosure.

If you can easily afford it, you should probably put 20% down on a house. You'll avoid paying for private mortgage insurance, and you'll have a lower loan amount and smaller monthly payments to worry about. You could save a lot of money in the long run.

Cons of PMI

The cost of the PMI payments is added to your monthly mortgage payments. Depending on the size of the down payment, loan term, and buyer's credit score, the cost of PMI can vary. This results in higher monthly costs until the PMI is removed.

PMI protects the lender, not the borrower. Because there's less of a down payment on this type of loan, the lender's risk is higher; to offset some of that risk, they require a specific type of insurance – PMI. If you stop making loan payments, PMI won't save you from foreclosure.

The amount you pay in PMI is a percentage of your principal mortgage loan amount. It is not impacted by appraisal. However, if your home increases in value to the point that you have gained substantial equity, a home appraisal will help prove to your lender that you qualify for PMI removal.

Factors that influence the cost of PMI

Your loan-to-value (LTV) ratio: The LTV ratio measures the percentage of the home's purchase price you're financing against the value of the home. The higher your LTV ratio, the higher your PMI payment.

A smaller down payment—and thus, lower LTV—likely will require you to pay PMI until you reach that 80% mark. The lower your LTV, the higher the risk for the lender, which is why the cost of PMI often increases as your LTV decreases. Finally, your credit score also can influence the cost of PMI.

Use a piggyback loan with 10% down and no PMI

So they effectively have a 20% down payment and do not have to pay mortgage insurance. The most common piggyback loan arrangement looks like this: An 80% first mortgage. A 10% second mortgage (usually a home equity line of credit)