Use this checklist to see how you can stop paying private mortgage insurance on your home loan.
Canceling
PMI
1. Are you qualified?
•
Most
people can cancel PMI once equity
in their home reaches 20 percent.
Some types of loans, such as government-insured
FHA and VA loans, require PMI
for the life of the loan. If in
doubt, call your loan servicer
to find out your options.
2. Do you have enough equity?
3. Has your home risen in value?
•
If
home values in your area are rising
quickly, your equity will reach
20 percent more quickly. Mortgage
servicers are not required to
consider your home's current value
but may do so.
4. Have you made extra payments?
•
The
other way to add equity is to
make extra payments. Have you
made any additional payments and
applied them to the principal?
5. Do the
math.
•
Estimated value minus mortgage balance = equity.
•
Equity divided by estimated value = percentage of equity.
•
If you come up with a figure of 0.20 (20 percent) or greater, and your estimate is accurate, there's a good chance you can drop PMI and save.
6. Call
your lender.
•
Talk to someone at your lender's customer service department to inquire about procedures for PMI removal. The formal request will likely have to be in writing, but calling first might save you some false steps later.
7 Write
your lender.
•
When you make your written request, ask your lender to provide, in writing, the minimum amount the property will have to be valued at to qualify to have the PMI dropped.
8. Get an
appraisal.
•
Most lenders require a formal appraisal of property -- at your expense -- before they will approve a request to drop PMI. Ask your lender if it has any specific requirements for the appraisal or appraiser that must be met. The company, rather than you, might have to order the work, for example, even though you'll have to pay the tab of approximately $200 to $350.
9. Final
precautions.
•
Make sure your loan is up-to-date before making the formal written inquiry to your lender. The lender will consider your payment history when deciding whether to drop PMI. Also, if the property has been converted into rental use, higher percentages of equity are required before lenders will waive the insurance.
•
Explain
what information is incorrect
and ask the company to stop reporting
it.
•
Include
copies of information that supports your case.
