Home ImprovementHome Maintenance March 18, 2024

Unlocking Your Home’s Hidden Treasure: How to Bid Farewell to PMI

Are You Overpaying? Let’s Investigate!

Let’s address a common financial pitfall—the infamous Private Mortgage Insurance (PMI). If you’ve owned your home for more than two years and are still allocating those extra hundreds of dollars each month toward PMI, it’s time to take action. While the bank might appreciate your loyalty, your wallet certainly doesn’t.

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Understanding PMI: A Brief Overview

PMI acts as a safeguard for lenders when your down payment falls below the 20% threshold. Essentially, it’s insurance, but you’re footing the bill. However, here’s the silver lining: PMI need not be a lifelong companion. Let’s explore the escape routes:

1. Automatic Cancellation

The federal Homeowners Protection Act of 1998 provides relief. Once your equity reaches 22%, PMI bids adieu automatically. Imagine it as a graduation ceremony for your mortgage—caps off, confetti flying, and PMI waving goodbye. The bank does not check to see if your home has appreciated, it just keeps ticking off the principle balance based on the original numbers.

2. Early Cancellation Request

Don’t hesitate; ask your loan servicer to cut those PMI strings. Once you hit 20% equity (based on the home’s original value), you qualify. Maintain a pristine payment history,

3. Accelerate Equity Growth

Channel your inner financial superhero. Make extra mortgage payments, wield the biweekly payment sword (that’s two extra payments per year), and watch your equity flourish.

4. Boost Your Home’s Value and Get an Appraisal

Keep an eye on your neighborhood’s property values. If your home’s worth has appreciated, it’s time for an appraisal. Rising home prices can catapult you past the 20% equity mark. Cha-ching!  Thinking about doing a project and adding value, check out this post on 5 Home Improvement Projects That Pay Off

5. Refinance Wisely

Think of refinancing as a makeover for your mortgage. Once you’ve achieved 20% equity, step into the refinancing salon. An appraisal awaits, and PMI might just vanish like a magic trick.

The Grand Finale: Freedom from PMI

Remember, PMI shields your lender, not you. Your homeowners’ insurance is the true guardian, protecting your home.

  1. Look up your loan provider’s contact info on your mortgage statement.
  2. Call and request a reappraisal.
  3. Yes, there’s a cost (typically $300-$800), but it’s a smart investment compared to the thousands you’ll keep needlessly spending.

Unsure of your current home value? Contact me and I’ll reach out and help you determine the current value of your home to see if this makes sense for you! If you don’t live in the Charlotte, NC area, I can connect you to a trusted realtor in your area to do this for you.

*FHA loans cannot have the PMI removed*