With the prices of housing skyrocketing in places like New York, Los Angeles, and San Francisco, homeowners interested in purchasing housing have started putting less than 20% down on a home. If you put less than 20%, your lender requires you to purchase private mortgage insurance to protect against you defaulting on your loan.
How to Remove PMI
PMI can be expensive, but there are ways you can qualify to not be required to purchase PMI for your loan after purchasing your home. First, you must have at 20% equity in your home; once you have paid at least that much, you can request your lender cancel your policy. Once you have paid at least 22% equity into your home, your lender is required to remove PMI.
Removing PMI Sooner
There are four ways you can remove PMI sooner than by simply waiting until you’ve invested 20% equity into your home.
1.Remodel your home - Often adding a new room, installing a pool or remodeling your kitchen, bathroom or other rooms in your home can increase the overall value of your home. Once you have finished the remodel, ask your lender to recalculate the value of your home, the ratio amount loaned to the value of your home might be less than 80%.
2.Refinance – If you bought your home and since purchasing, the value has increased, refinancing is one way to remove the lender’s requirement for PMI.
3.Prepay your loan— If you have the extra cash, consider paying more off on your loan.
4.Reappraise your house—Some lenders will consider the new value of your home over the value of what it was when you purchased.
Your lender is legally obligated to tell you how many years or months until you are able to pay your loan down enough to cancel your PMI. If you your rights have been violated by the mortgage company, our Waterbury real estate lawyer can help you. Call today to discuss your case. (203) 583-8299