How to Escape the Clutches of PMI and Keep More Cash in Your Pocket

If your down payment was less than 20% of the purchase price when you purchased your home, your mortgage loan officer may have encouraged you to pay extra on the loan monthly so that your PMI (Private Mortage Insurance) payments would end sooner rather than later. But it's a little more complicated than that.

If your mortgage was originated on or after July 29, 1999, your PMI must be automatically terminated once your mortgage balance falls to 78% of the original value of the property. You don't need to take any action to have the PMI removed in this case. However, if you paid reached this balance by paying extra each month, many lenders will require you to wait until the 78% balance was scheduled to occur. 

Check your closing paperwork to see if you can request an early cancellation of PMI before then; usually you will be required to have an appraisal or BPO (Broker Price Opinion) completed to prove that your loan balance is less than 80% of the original value of the property.  

Another way to remove PMI is to refinance your mortgage. If you have enough equity in your home, you can refinance your mortgage to a loan that does not require PMI.