You may be paying too much money in your current mortgage payment. Removing your PMI could drop your monthly mortgage payment down significantly!
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Lenders are wary of lending more than 80% of a home's value. When a buyer puts a down payment of less than 20%, the lenders offset their risk by requiring the borrower to pay Private Mortgage Insurance (PMI).
This insurance protects the lender in case a borrower defaults on the loan, and the value of the house is lower than the loan balance. The extra payment is rolled into the borrower's loan.
Lenders are required to terminate the PMI of loans originated after July 1999, when the principal balance of the loan reaches 78% of the original loan amount. They also must terminate the PMI at the request of the home owner when, after the borrower has made enough payments, the principal amount reaches 80%.
There is another way that home owners might be able to remove their PMI. If your property value has grown to the point where the amount of principal still owed is less than 80% of your homes current value, you can request the lender remove your PMI.
An appraisal of your property will tell you if your home's equity has risen above 20%. Faced with this data, lenders will most often eliminate the PMI, although they are under no obligation to do so.
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