How to Eliminate PMI on Your Home: A Smart Financial Move
by rick cantville
october 2023
Introduction:
When purchasing a home with less than a 20% down payment, most homeowners are required to pay for Private Mortgage Insurance (PMI) to protect the lender in case of default. While PMI allows individuals to buy a home with a smaller down payment, it can also add significant costs to their monthly mortgage payments. However, there are effective strategies to eliminate PMI and save money in the long run. In this blog post, we will explore some of the most practical methods to eliminate PMI on your home.
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Increase Your Home Equity:
The most straightforward way to eliminate PMI is by increasing the equity in your home. Equity refers to the percentage of your home that you own. Once your home equity reaches 20%, you can request the lender to cancel PMI. There are two primary ways to achieve this:
- Making Additional Payments: Paying more towards your principal each month can accelerate the process of building equity. Consider allocating extra funds from your budget towards paying down the mortgage principal. By reducing the outstanding loan balance, you effectively increase your equity and move closer to eliminating PMI.
- Home Appreciation: Another way to increase your home equity is through market appreciation. If the value of your home has increased due to market conditions or improvements you've made, it can help you reach the 20% equity threshold faster. Keep an eye on your local real estate market to determine if home prices are rising, potentially boosting your equity.
Request PMI Removal:
If you believe you have already reached the 20% equity mark based on your home's current value, you can directly request the lender to remove PMI. This process typically involves submitting a formal written request, along with an appraisal or other documentation supporting your claim. Keep in mind that some lenders might have specific guidelines and requirements for PMI removal, so it's essential to familiarize yourself with their policies and procedures.
Pay for a New Appraisal:
If you believe that the value of your home has increased significantly since your initial purchase, you can consider paying for a new appraisal. If the appraisal shows that your home's value has indeed risen, and you now have at least 20% equity, you can present this appraisal to your lender as evidence for PMI removal. However, before investing in an appraisal, it's prudent to consult with your lender and confirm their willingness to accept this approach.
Related Article: What Are The Additional Costs Of Buying A Home?
Conclusion:
Eliminating PMI on your home can save you hundreds of dollars each month and thousands of dollars over the life of your loan. By focusing on increasing your home equity, refinancing strategically, requesting PMI removal, or obtaining a new appraisal, you can take proactive steps to eliminate this additional cost. Remember to carefully assess your financial situation, consult with your lender, and evaluate the potential savings before deciding on the best course of action. With persistence and informed decision-making, you can successfully eliminate PMI and achieve greater financial stability in homeownership.
Questions about this article or questions about home ownership?
#PMIElimination #HomeEquityBuilder #SmartMortgageMoves #SaveOnPMI #EquityGrowth
Brokered By
United Real Estate - Queen City
7880 Idlewild Rd
Indian Trail, NC 28079
