Private Mortgage Insurance (PMI) allows individuals to purchase their home with less than a 20% down payment. It actually protects the lender or investor in case a borrower stops paying. PMI is a requirement for homeowners who purchase their homes with conventional financing and have put less than 20% down payment. Therefore, PMI is not collected for those who purchased their home with down payment of 20% or more as this should be enough equity to cover the losses of the lender if ever.
The mistake some homeowners make is they continue to pay this mortgage insurance long after it’s no longer needed. The good news is that once you’ve reached 20% equity by home appreciation/home improvements/paying down the principal balance of the mortgage – or any combination of the three – you can now ask your lender to cancel the Private Mortgage Insurance. Every loan servicing office may have different procedures and requirement for the cancellation of PMI. Ask your servicing lender about this and have them provide you the list of specific things needed to go through about the cancellation of your PMI.
If you have been paying mortgage insurance and you feel like you have already more than 20% of equity, it’s time now to re-evaluate and see if you may already file for the removal of PMI. An appraisal is one of the necessary proofs you will be asked to provide to calculate whether you are now qualified to stop paying for this insurance. Washington Appraisal (Washington DC appraiser) offers free consultation to help you determine if you have enough home equity to be able to cancel your PMI.
Always remember that PMI does not protect you, the homeowner for loss, so save yourself from paying mortgage insurance longer than necessary.
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