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4 Ways to Remove Mortgage Insurance

July 20, 2023

Removing private mortgage insurance (PMI) on your conventional loan can save you over the life of the loan as well as on your monthly payment.

Transcript

Ryan Hillard: Let’s talk about four ways you can get rid of your mortgage insurance! Mortgage insurance, PMI (Private Mortgage Insurance), is a monthly fee that is added to your loan in the event that you may default, so it will lessen the risk to the lender and protect them if you were to default. You will have mortgage insurance on a conventional loan, and everything we’re going to be talking about is related to a conventional loan, but you’ll have mortgage insurance if you have a down payment that is less than 20% of the value. With that in mind, there are four ways going forward on how you might be able to get rid of mortgage insurance. 

Refinance

Ryan Hillard: The first and most popular way to get rid of PMI is to refinance. If you live in an area where your home value has been increasing and we’re in an interest rate environment where rates are going down, then you can refinance to help save some money with a lower overall payment, and if that’s the situation where the new loan amount is equal to or less than 80% of the new value then you’re going to get rid of your mortgage insurance, and that’s a great way to go! However, we’re not always in that type of environment, and if rates are increasing, the good news is that you still have some options. 

Request Early Cancellation

Ryan Hillard: The next way that you can go about getting rid of mortgage insurance is to request early cancellation. In this case, you can save money by removing the PMI sooner through an early cancellation once you have 20% equity in your home. You can submit a written request to the lender or the servicer and ask the PMI be removed. If you’re wondering who it is that you do reach out to, my first suggestion is there’s going to be a phone number at the top of your mortgage statement; that’s a good place to start. 

Wait for MI to Automatically Cancel

Ryan Hillard: The next way to go about getting rid of mortgage insurance is to just let it cancel automatically. If you just continue making all of your payments on time, and you get to the point where your loan amount is 78% of the original purchase price, then your mortgage insurance will fall off automatically. You don’t need to do anything, and it will just be removed from your loan; that’s a great way to go! 

Get a New Appraisal

Ryan Hillard: Finally, the fourth way to go about getting rid of your mortgage insurance is to get a new appraisal. Now, this is one that not a lot of people or not as many people know about; everybody goes back to, “Well, if I need a new appraisal, then I’m just going to refinance it.” But this is a case where you don’t have to do that. If the property values are rising in your area, then you can request an early cancellation based on the home’s current value, and the current value would typically be measured by a new appraisal. But, before you go and end up ordering a new appraisal, you want to make sure that you check with the lender or the servicer; again, whoever is at the top of your mortgage statement, call that number and see what their rules are for early cancellation. In some cases, they may require you to use a certain appraiser or appraisers, and in others, they may just allow for a broker’s opinion of value, and that would be a cheaper and easier way to go. 

Ryan Hillard: Generally, to cancel PMI based on the current value of the home, you must have owned the home for at least two years and have 25% equity in the home or 75% loan to value. If you’ve owned the home for at least five years, then you cancel it with 20% equity or 80% loan to value. 

Ryan Hillard: That’s four ways we talked about getting rid of your mortgage insurance. I hope that’s helpful; reach out to your lender. If they’re not available, reach out to me. I’ll be happy to help!

Ryan Hillard
Founder & Managing Broker
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