When should you get rid of PMI?

Here are some factors to consider when deciding whether to eliminate PMI:

Equity in the home: The first factor to consider is how much equity you have in the home. Once you have built up 20% equity in the home, you may be able to eliminate PMI. You can calculate your equity by dividing the current loan balance by the current value of the home.

LTV ratio: The loan-to-value (LTV) ratio is the amount of the loan compared to the value of the home. Once the LTV ratio drops below 80%, you may be able to eliminate PMI. You can calculate your LTV ratio by dividing the current loan balance by the original purchase price of the home.

Time: Depending on the terms of your mortgage, you may have to wait a certain amount of time before you can eliminate PMI. For example, some lenders require borrowers to pay PMI for at least two years before they can request its removal.

Refinancing: If you can't eliminate PMI through regular payments, you may be able to refinance your mortgage to a new loan that doesn't require PMI. However, refinancing comes with its own costs and considerations, so it's important to weigh the pros and cons before making a decision.

You should get rid of PMI (Private Mortgage Insurance) when you have built up enough equity in your home or when you meet the requirements set by your lender or mortgage contract. PMI is typically required by lenders when the borrower's down payment is less than 20% of the purchase price of the home, and it is designed to protect the lender in case the borrower defaults on the loan.

Here are some common ways to eliminate PMI:

• Wait until you have built up 20% equity in your home: Once you have paid down your mortgage to the point where you have 20% equity in the home, you may be able to eliminate PMI. Some lenders may require you to request its removal, while others will automatically cancel it once you meet this threshold.

• Refinance your mortgage: If you can't wait until you have built up enough equity, you may be able to refinance your mortgage to a new loan that doesn't require PMI. This option can be particularly beneficial if interest rates have dropped since you took out your original mortgage.

• Make a lump-sum payment: If you can't refinance your mortgage, you may be able to make a lump-sum payment towards the principal of your loan to reduce the balance and eliminate PMI.

• Request PMI removal: Some lenders may allow you to request PMI removal if you have made a certain number of on-time payments, or if you have made improvements to the property that increase its value.

Overall, the right time to eliminate PMI will depend on your specific situation and the terms of your mortgage. It's important to carefully consider your options and consult with your lender or a financial advisor before making a decision.