Step by Step on how to get PMI removed

[Ryan Thomson]

If you have owned your home since 2020 there is a great chance your home has appreciated enough in value to get your monthly PMI payment removed. This will easily save you 2-5k/year.

Getting rid of Private Mortgage Insurance (PMI) can be a financial game-changer for many homeowners. PMI is insurance that lenders require from most homebuyers who obtain loans with less than a 20% down payment. The PMI protects the lender if the borrower defaults on the loan. However, once your Loan-to-Value (LTV) ratio drops below 80%, you might be able to remove PMI. Here's a guide to help you navigate this process.

Understanding LTV and Home Appreciation

Your LTV ratio is calculated by dividing your mortgage balance by your home's value. When you first buy your home, that value is determined by the sales price. However, over time, its value may rise due to market conditions, home improvements, or both. Home appreciation can significantly change your LTV. Meanwhile the loan amount is going down as you pay principal towards your loan. Appreciation and loan paydown often make you eligible to remove PMI earlier than anticipated.

Step 1 Get an idea of the value of your home (ballpark).

There are lots of ways to get an idea of what your home is worth.

• Ask your real estate agent to run comps for you and give you an estimate of the value of your home.
• Look at comps sold in your neighborhood.

Step 2: Contact Your Lender

If you think your home meets the 80% LTV, the first step to getting PMI removed is to contact your loan servicing company (the one you are making payments to). Let them know that you believe your home's value has increased enough that your loan balance is below 80% LTV. Your loan servicer should be able to provide you with the specific steps you need to take to get PMI removed.

Step 3: Get an Appraisal or a BPO

Lenders will usually require a professional appraisal or a Broker's Priced Opinion (BPO) to determine the value of your home. BPO will typically cost about $100-200. An appraisal will generally cost you between $500 and $800. The lender will determine if you are allowed to go with the cheaper BPO option. Which is basically paying a realtor somewhere to look at sold comps and say what they believe your house is worth.

Step 4: Calculate Your LTV Ratio

After you have the appraised value, divide your current mortgage balance by the appraised value to calculate your new LTV ratio. If it's below 80%, you're on the right track. Example: Appraised Value is 100k. Loan Balance is 70k. LTV = 70/100 = 0.7 or 70%.

Step 5: Follow Up

Don't assume that your PMI will be automatically removed after you've submitted your request. Keep a close eye on your mortgage statements to ensure that the PMI has been eliminated and confirm this with your loan servicer. If there are any delays, be proactive in resolving them.

Step 6: Reconfigure Your Budget

After successfully removing PMI, you'll have extra money in your monthly budget. You might consider building an emergency fund or investing the extra money.

Final Thoughts

Removing PMI is a step towards financial freedom. An increase in your home's value could be your ticket to lower monthly payments and greater financial flexibility. Take advantage of it as soon as you can!

[Xavier Leal]

Quote from @Ryan Thomson:

If you have owned your home since 2020 there is a great chance your home has appreciated enough in value to get your monthly PMI payment removed. This will easily save you 2-5k/year.

Getting rid of Private Mortgage Insurance (PMI) can be a financial game-changer for many homeowners. PMI is insurance that lenders require from most homebuyers who obtain loans with less than a 20% down payment. The PMI protects the lender if the borrower defaults on the loan. However, once your Loan-to-Value (LTV) ratio drops below 80%, you might be able to remove PMI. Here's a guide to help you navigate this process.

Understanding LTV and Home Appreciation

Your LTV ratio is calculated by dividing your mortgage balance by your home's value. When you first buy your home, that value is determined by the sales price. However, over time, its value may rise due to market conditions, home improvements, or both. Home appreciation can significantly change your LTV. Meanwhile the loan amount is going down as you pay principal towards your loan. Appreciation and loan paydown often make you eligible to remove PMI earlier than anticipated.

Step 1 Get an idea of the value of your home (ballpark).

There are lots of ways to get an idea of what your home is worth.

• Ask your real estate agent to run comps for you and give you an estimate of the value of your home.
• Look at comps sold in your neighborhood.

Step 2: Contact Your Lender

If you think your home meets the 80% LTV, the first step to getting PMI removed is to contact your loan servicing company (the one you are making payments to). Let them know that you believe your home's value has increased enough that your loan balance is below 80% LTV. Your loan servicer should be able to provide you with the specific steps you need to take to get PMI removed.

Step 3: Get an Appraisal or a BPO

Lenders will usually require a professional appraisal or a Broker's Priced Opinion (BPO) to determine the value of your home. BPO will typically cost about $100-200. An appraisal will generally cost you between $500 and $800. The lender will determine if you are allowed to go with the cheaper BPO option. Which is basically paying a realtor somewhere to look at sold comps and say what they believe your house is worth.

Step 4: Calculate Your LTV Ratio

After you have the appraised value, divide your current mortgage balance by the appraised value to calculate your new LTV ratio. If it's below 80%, you're on the right track. Example: Appraised Value is 100k. Loan Balance is 70k. LTV = 70/100 = 0.7 or 70%.

Step 5: Follow Up

Don't assume that your PMI will be automatically removed after you've submitted your request. Keep a close eye on your mortgage statements to ensure that the PMI has been eliminated and confirm this with your loan servicer. If there are any delays, be proactive in resolving them.

Step 6: Reconfigure Your Budget

After successfully removing PMI, you'll have extra money in your monthly budget. You might consider building an emergency fund or investing the extra money.

Final Thoughts

Removing PMI is a step towards financial freedom. An increase in your home's value could be your ticket to lower monthly payments and greater financial flexibility. Take advantage of it as soon as you can!

Hi Ryan, 

I called my lender a few days ago and they said it couldn't be removed because I have a VA loan and that I would have to refinance out of it. Is that accurate? From what I found online it doesn't look like the VA loan has PMI but looking at my mortgage statements, I'm certainly paying for insurance. Overall, I couldn't find a straight answer. Thank you!

[Andrew Postell]

@Xavier Leal no VA loan has PMI/MI or anything of that nature. You are certainly paying for HOME INSURANCE, which protects your home from physical damage, but if you are in a VA loan then you should not be paying for PRIVATE MORTGAGE INSURANCE.  "PMI" or "MI" is when people use certain loan types and don't have 20% downpayment.  They pay this little extra monthly charge in their payment ON TOP OF taxes and home insurance.  Us veterans don't have that if we used the VA loan.

Hope all of that makes sense.

[Xavier Leal]

Quote from @Andrew Postell:

@Xavier Leal no VA loan has PMI/MI or anything of that nature. You are certainly paying for HOME INSURANCE, which protects your home from physical damage, but if you are in a VA loan then you should not be paying for PRIVATE MORTGAGE INSURANCE.  "PMI" or "MI" is when people use certain loan types and don't have 20% downpayment.  They pay this little extra monthly charge in their payment ON TOP OF taxes and home insurance.  Us veterans don't have that if we used the VA loan.

Hope all of that makes sense.

Thanks Andrew! That makes a ton of sense. 

[Ryan Thomson]

Good word @Andrew Postell. 

VA Loans do not have PMI

FHA Loans cannot get rid of PMI.

Conventional Loans can get rid of PMI when you have at least 80%LTV.

[Yu Liu]

I did this earlier this year and it's great to save an additional $50 a month, not much but it helps over the long term!

[Benjamin Sulka]

Quote from @Ryan Thomson:

Good word @Andrew Postell. 

VA Loans do not have PMI

FHA Loans cannot get rid of PMI.

Conventional Loans can get rid of PMI when you have at least 80%LTV.

 Ryan,

So in order to get out of PMI if you began with an FHA loan is to refi into conventional?

Thanks for posting this. I didn't even know that your loan to value could be improved if the value of your home increased. I thought it was entirely based on your purchase price. 

[Ryan Thomson]

Quote from @Benjamin Sulka:

Quote from @Ryan Thomson:

Good word @Andrew Postell. 

VA Loans do not have PMI

FHA Loans cannot get rid of PMI.

Conventional Loans can get rid of PMI when you have at least 80%LTV.

 Ryan,

So in order to get out of PMI if you began with an FHA loan is to refi into conventional?

Thanks for posting this. I didn't even know that your loan to value could be improved if the value of your home increased. I thought it was entirely based on your purchase price. 

The only way to get rid of PMI for an FHA loan is to get rid of the FHA loan. They are great for only putting 5% down on a duplex. So I would certainly still use them as PMI is not that big of a deal. But no need to pay it if you don't have to.

[Zachary Ware]

Great post Ryan! It's unfortunate that the PMI is stuck on FHA loans, but if you are getting a multiunit property, it can certainly be worth it!

[Benjamin Sulka]

Quote from @Ryan Thomson:

Quote from @Benjamin Sulka:

Quote from @Ryan Thomson:

Good word @Andrew Postell. 

VA Loans do not have PMI

FHA Loans cannot get rid of PMI.

Conventional Loans can get rid of PMI when you have at least 80%LTV.

 Ryan,

So in order to get out of PMI if you began with an FHA loan is to refi into conventional?

Thanks for posting this. I didn't even know that your loan to value could be improved if the value of your home increased. I thought it was entirely based on your purchase price. 

The only way to get rid of PMI for an FHA loan is to get rid of the FHA loan. They are great for only putting 5% down on a duplex. So I would certainly still use them as PMI is not that big of a deal. But no need to pay it if you don't have to.

 Thanks for your response! I appreciate the clarity. 

[Caroline Gerardo]

This is a ChatGPT/ Bard post. Some information is wrong.

1. Borrower must be current on loan, some loans they have to pay perfect for past 24 months to ask for the mortgage insurance to be dropped

2. Some loan products DO NOT allow this until you get to mid point in the amortization schedule, depends on the note and product type. Meaning you have to be at 15 years.

3. FHA never drops it, only if you sell or refinance

 4. You need to be at 78% not 80% 
Under the automatic termination provisions, as long as the borrower is current on their loan the servicer must cancel PMI when the loan reaches seventy eight percent of the original value based on the amortization schedule

 5. Servicer can deny your appraisal but borrower is required to receive copies of any they run
@Zachary Ware @Benjamin Sulka  @Andrew Postell

[Jake Andronico]

@Ryan Thomson

Great post, thank you! My PMI right now is about $90 per month, but $1k per year is $1k per year.

I appreciate the detail. 

[Mark F.]

Quote from @Ryan Thomson:

Quote from @Benjamin Sulka:

Quote from @Ryan Thomson:

Good word @Andrew Postell. 

VA Loans do not have PMI

FHA Loans cannot get rid of PMI.

Conventional Loans can get rid of PMI when you have at least 80%LTV.

 Ryan,

So in order to get out of PMI if you began with an FHA loan is to refi into conventional?

Thanks for posting this. I didn't even know that your loan to value could be improved if the value of your home increased. I thought it was entirely based on your purchase price. 

The only way to get rid of PMI for an FHA loan is to get rid of the FHA loan. They are great for only putting 5% down on a duplex. So I would certainly still use them as PMI is not that big of a deal. But no need to pay it if you don't have to.

 There is no 5% down on a duplex anymore unless some local bank/lender is offering that specific product.