You do not have to pay private mortgage insurance for the life of your home. Once you have reached 20% equity in your home by appreciation, improvements made to the home or paying down the principal balance of the mortgage, you can force the lender to cancel the private mortgage insurance.
Unfortunately, some homeowners unknowingly pay this insurance for many years after it is no longer needed and could end up paying an extra $5000 or even $10,000 or more in useless insurance premiums.
How to force your lender to cancel private mortgage insurance
To force your lender to cancer private mortgage insurance, request in writing that the private mortgage insurance be canceled and provide the lender with proof that you have more than 20% equity. Some mortgage lenders will require 25% equity. The necessary proof of equity is usually a state certified appraisal on the appropriate form. The URAR-1004 uniform residential appraisal report is needed for single family homes.
Most lenders will require you to fill out a brief form. Since private mortgage insurance protects the mortgage lender against loss if a borrower stops making payments, the mortgage lender may also require you to have a good payment history. A good payment history usually means that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years.
Tips
•Make sure to contact the right mortgage lender. Your original lender may have sold your loan to another company.
•Your loan officer will be able to help you with the cancellation procedure.
•The Homeowners Protection Act requires servicing lenders to make homeowners aware of the existence of any PMI Insurance they might be paying for and the requirements necessary to have it cancelled.
•Most lenders require a real estate appraisal by a state certified appraiser as the primary proof required to eliminate unnecessary PMI insurance.
•If your home value has increased, you may be able to cancel PMI on your mortgage.
•Your home can not have decrease in value below the original purchase price in order to be eligible for PMI cancellation.