PMI Private Mortgage Insurance - How to remove it from your mortgage

Buyers with down payments of less than 10% are required to get mortgage insurance. These loans are risky as evidenced with the "sub-prime" mortgage crisis.

The amount of the insurance is often $40 to $50 per month for a $100,000 home.  This payment is typically added to the overall payment

Homeowners continue to pay the PMI even after their loan balance has dropped below the original 80 percent threshold, which occurs as the equity in the home increases.

Previously, lenders were under no obligation to inform borrowers when they had reached a point where the PMI could be removed. In 1999, when the Homeowners Protection Act took effect and this law now obligates lenders to terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. 

The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent!  This law only applies to home loans - whether first time or refinances - that closed after July, 1999. Also certain other conditions must be met, such as being current on the loan payments. Buyers that purchased before July 1999 can also have their PMI removed.

The question is when does the equity exceed the 20 percent point? A state certified appraiser can provide an accurate appraisal to determine this.  

Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

Private Mortgage Insurance (PMI): Law Requires Lenders to Cancel PMI