You can remove PMI from your monthly payment once you have 20% equity in your home. You can do this either by requesting its cancellation or refinancing the loan. The specific steps you’ll take to cancel your PMI will vary depending on the type of insurance you have.
Borrower-Paid Mortgage Insurance
When you reach 20% equity in your home, you can make a request to your lender to remove your BPMI. That process looks like this:
Step 1: Build 20% Equity
You can’t cancel your PMI until you have at least 20% equity in your property. Continue to make payments on your loan each month. Divert any extra money you have coming in toward your principal to build equity faster.
Be sure to include a note with your extra payments to tell your lender you want the payment to go toward your principal balance and not your next payment. Sometimes there’s a spot on your statement or a checkbox online for this.
Step 2: Contact Your Lender
As soon as you have 20% equity in your home, let your lender know to cancel your PMI. Follow any necessary steps your lender requires to make this happen.
Step 3: Make Sure Your PMI Is Gone
Ask your lender to confirm that you no longer have to pay PMI. Then, request a mortgage statement with your current payment information. Make sure your monthly payment is lower than what you paid with PMI on your loan. Request more information from your lender if your monthly payment stays the same.
Lender-Paid Mortgage Insurance And Mortgage Insurance Premiums
You can only remove your payments with a refinance if you have LPMI or you have MIP and made less than a 10% down payment. (However, some borrowers may qualify for FHA MIP removal if their loan started before June 3, 2013.) Here’s how that process works:
Step 1: Reach 20% Home Equity
You must reach 20% equity in your home before you’re allowed to refinance. You’ll need to pay for PMI again if you refinance with less than 20% equity.
Step 2: Compare Lenders
You don’t have to refinance with your current lender – you may work with a new company if you’d like. Compare lenders in your area and choose one you’d like to use for a mortgage refinance. Check their refinancing standards to make sure you qualify before you apply.
Step 3: Apply For A Refinance
Fill out an application, submit your financial documentation and respond to any inquiries from the lender as soon as possible. Remember to specify you want to refinance to a conventional loan.
Step 4: Wait For Underwriting And Appraisals To Clear
Once you apply for your loan, your lender will begin a process called underwriting. During this time, a financial expert looks at your documents to make sure you qualify for a refinance. Your lender will also help you schedule a home appraisal. Then, you must wait for the appraisal and underwriting processes to be completed.
Step 5: Acknowledge Your Closing Disclosure
After underwriting and an appraisal, your lender will send you a document called a Closing Disclosure. This document tells you your new loan terms as well as what you must pay in closing costs. Remember to acknowledge it as soon as you receive it. Your lender can’t schedule your closing until you have time to read your disclosure.
Step 6: Attend Closing
Here you’ll pay your closing costs and sign on your new loan. From there, you make payments to your new lender.
