Your monthly mortgage loan payments are made up of various costs, and many borrowers are also required to pay Private Mortgage Insurance (PMI) each month, which are additional costs that are added into their mortgage loan payments. Borrowers who put down less than 20 percent of the home’s sale price will be required to pay PMI until their principal balance falls below 80 percent. If you are looking for a way to lower your mortgage loan payments, eliminating your PMI is one way to do so. There are a few different ways that you can potentially eliminate PMI—whether you already own a home and you’re making mortgage loan payments, or if you’re currently house hunting and looking for ways to keep costs down.
To avoid paying PMI each month, try the following:
Lower your budget
If you have $25,000 set aside for your down payment, you may be considering a home that costs around $250,000, since most mortgage loan lenders only require a 10 percent down payment. However, because it’s only 10 percent, you may want to reconsider if you want to avoid paying PMI. Keep your down payment the same, but consider lowering your housing budget and looking for homes that will allow you to put down at least 20 percent. Not only will your monthly payments be lower because you are borrowing less, but you also won’t be paying PMI each month.
Refinance your mortgage loan
If you’re paying PMI each month and you also have a high interest rate, you might want to consider lowering your monthly mortgage loan payments by refinancing your loan. Depending on what you qualify for by refinancing and obtaining a new home loan, you might be able to get rid of PMI and lower your interest rate at the same time.
Pay off your mortgage loan quicker
Whether you make payments more frequently (for example, biweekly instead of once a month), or make larger payments, you’ll gain equity in your home that much faster. The faster you get your balance under 80 percent, the sooner you’ll be able to get rid of PMI.
Submit a written request
If you have been timely with your mortgage loan payments and you’ve almost paid 20 percent into the home’s equity, you could send a written request to your lender and ask them to cancel your PMI. However, you’ll only be eligible to get your PMI canceled if your principal balance is coming close to falling below 80 percent. It can be difficult to remember when this date will be, especially if you’ve made larger or more frequent payments, so ask your lender how far away you are from reaching this goal.