Removing PMI on your loan is worth it and here is how it works.
Private Mortgage Insurance (PMI) is typically required when a borrower puts down less than 20% of the home's purchase price as a down payment. PMI protects the lender in case the borrower defaults on the loan. Once the borrower has paid down the loan enough to have 20% equity in the home, they may be able to remove PMI from their mortgage loan.
Here are some steps that may help in removing PMI from a mortgage loan:
Contact the lender: The borrower should contact their lender to find out the requirements for removing PMI from their loan.
Determine the loan-to-value loan to value ratio: The borrower should determine the current loan to value ratio of their loan by dividing the loan balance by the current appraised value of the home. If the LTV ratio is at or below 80%, the borrower may be eligible to remove PMI.
Make additional payments: If the LTV ratio is close to 80%, the borrower may consider making additional payments to pay down the loan balance and reach the 80% loan to value ratio threshold.
Get an appraisal: If the borrower believes that the home has increased in value since the loan was originated, they may want to get an appraisal to show that the LTV ratio is at or below 80%.
Request PMI removal: Once the borrower has met the requirements for PMI removal, they should request that the lender remove the PMI from their mortgage loan. The lender may require documentation, such as an appraisal or proof of additional payments, before removing PMI.
It's important to note that the process of removing PMI can vary depending on the lender and the specific loan. It's always best to consult with the lender and follow their guidelines to ensure a smooth and successful removal of PMI.
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