I'd rather put my PMI payments toward my mortgage principal. How can I get my lender to let me out of PMI?

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Dear Credible Money Coach,

I’ve owned my home for a year now and my PMI payments are quite high. Is there a way, without refinancing, to get the bank to take the PMI off? I really want to use that money toward the principal. — Randy, New Jersey 

Hi Randy! Thanks for your question and kudos to you for wanting to put extra toward the principal of your mortgage. That’s a great way to pay it off faster.

You definitely can get private mortgage insurance removed from your mortgage — provided you meet the requirements for doing so.

It may help to understand why lenders require PMI. Private mortgage insurance protects your lender if you default on your loan — the PMI will pay your loan if you don’t. Considering the fact that if you default on your loan, the lender gets to foreclose on your home and take possession of it, plus get paid through PMI, requiring you to have PMI is entirely to the lender’s advantage.

Generally, lenders will require PMI if you put less than 20% down on your home when you bought it. Regardless of your credit score, income, or how much you have in the bank, many lenders view a lower down payment as a flag that you may be less likely to repay your mortgage than someone who made a higher down payment. 

Federal law requires mortgage lenders to allow you to remove PMI from your loan when your mortgage balance falls below 80% of your home’s original value. 

PMI cancellation can happen automatically on a specific date identified in the PMI disclosure form you should have received from your lender at closing. Or, you can request to terminate your PMI sooner if you’ve paid down the balance to 80% or less before that specified date.

And although home values have been soaring lately, an increase in your home’s value doesn’t qualify you to request PMI termination. Your mortgage balance must be 80% or less of the price you paid for the home, or that it appraised at when you bought it — not what it might appraise for now.

To request PMI cancellation, you’ll need to ask your lender in writing. You’ll need to be current on your mortgage with a history of on-time payments. You may need to prove to your lender that there are no other liens, like a second mortgage, on your home. And you may have to demonstrate that your home’s value hasn’t decreased since you bought it.

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This article is intended for general informational and entertainment purposes. Use of this website does not create a professional-client relationship.  Any information found on or derived from this website should not be a substitute for and cannot be relied upon as legal, tax, real estate, financial, risk management, or other professional advice.  If you require any such advice, please consult with a licensed or knowledgeable professional before taking any action.

About the author: 

Laura Adams is a personal finance and small business expert, award-winning author, and host of Money Girl, a top-rated weekly audio podcast and blog. She’s frequently quoted in the national media, and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson, and advocacy work. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, Instagram, Facebook, Twitter, and LinkedIn.

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