How to Get Rid of Your Unwanted PMI

NEW YORK ( TheStreet) -- Private mortgage insurance is the expense all homeowners hate. You pay for it but only the lender benefits, collecting an insurance claim if you default on your mortgage. You can't even shop for your own insurer; that's done buy the lender, who has no stake in keeping the premium low.

Typically, PMI costs around 0.5% of the home's value per year, often adding many thousands to the expense of owning a home over time.

Fortunately, it's possible to wriggle free of this requirement. And the robust rise in home prices over the past year, plus the effects of low mortgage rates, may enable you to cancel your PMI much sooner than you think. Just be sure not to step in a hole along the way, by missing a mortgage payment or taking out a home equity loan.

It all comes down to the amount of equity you have in the home or the difference between the home's current value and the debt remaining on your mortgage. If you owed $160,000 on a $200,000 home, you'd have 20% equity. PMI is required if equity is below 20%, and the PMI premium can be higher if equity is substantially below that level.


A federal law passed in 1999 requires lenders to cancel PMI automatically when the loan balance falls to 78% of the value of the property at the time the loan was made. If the borrower requests it, the lender must cancel when the balance falls to 80% of that starting value.

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