I prefer to put my PMI payments on the principal of my mortgage. How can I get my lender to let me out of PMI?

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Dear Credible Money Coach,

I’ve owned my house for a year now and my PMI payments are pretty high. Is there any way to get the bank to withdraw the PMI without refinancing? I really want to use that money for the director. — Randy, New Jersey

Hello Randy! Thank you for your question and kudos to you for wanting to spend extra on your mortgage principal. That’s a great way to pay it off faster.

You can definitely get private mortgage insurance removed of your mortgage — provided you meet the conditions.

It can help to understand why lenders require: PMI. Private mortgage insurance protects your lender if you default on your loan — the PMI will pay your loan if you don’t. Considering that if you default on your loan, the lender is allowed to foreclose and take possession of your home, plus be paid through PMI, requiring you to have PMI, is entirely in the lender’s favor.

In general, lenders need PMI if you less than 20% down on your house when you bought it. Regardless of your credit score, income, or how much you have in the bank, many lenders see a lower down payment as a sign that you will be less likely to pay back your mortgage than someone who has made a higher down payment.

Federal law requires mortgage lenders to allow you to remove PMI from your loan when your mortgage balance is less than 80% of your home’s original value.

PMI cancellation can happen automatically on a specific date stated in the PMI Disclosure Form you should have received from your lender at closing. Or you can request to terminate your PMI earlier if you have paid the balance up to 80% or less before that particular date.

And while your home’s value has skyrocketed lately, an increase in your home’s value doesn’t qualify you to file for PMI termination. Your mortgage balance should be 80% or less of the price you paid for the house, or what it was appraised at when you bought it — not what it might be valued now.

To request PMI cancellation, you must request it in writing from your lender. You must be aware of your mortgage with a history of on-time payments. You may need to prove to your lender that there are no other liens, such as a second mortgage, on your home. And you may need to show that your home’s value hasn’t fallen since you bought it.

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This article is for general informational and entertainment purposes. The use of this website does not create a professional customer relationship. Any information contained on or derived from this website should not be a substitute for and should not be used as legal, tax, real estate, financial, risk management or other professional advice. If you require such advice, please consult a licensed or knowledgeable professional before taking any action.

About the author:

Laura Adams is a personal finance and small business expert, award-winning author and host of money girl, a top-rated weekly audio podcast and blog. She is often quoted in the national media and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson and advocacy work. She holds an MBA from the University of Florida and lives in Vero Beach, Florida. follow her LauraDAdams.com, Instagram, facebook, Twitter, and LinkedIn.

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