Hi Reader,
If you purchased a home with less than a 20% down payment, you’re likely paying Private Mortgage Insurance (PMI). This extra monthly cost doesn’t go toward your loan—it simply protects your lender. But here’s the good news: you may be able to remove PMI sooner than you think, potentially saving thousands.
Key Takeaways:
✅ You can request PMI removal when your loan reaches 80% of the home’s original value.
✅ Lenders must automatically cancel PMI at 78% loan-to-value (LTV).
✅ Some lenders allow early cancellation if your home’s value has increased, requiring a new appraisal and a solid payment history.
Real Savings Example:
- A borrower who removes PMI after 2 years instead of waiting 7+ years could save $12,000 to $15,000—all for the cost of a ~$800 appraisal.
Next Steps:
If you’ve owned your home for 2-4 years, check your lender’s PMI removal policy. A rising housing market may mean you qualify to cancel PMI now, putting money back in your pocket!
A Word of Caution:
While eliminating PMI can be a smart financial move, be mindful of how you fund debt payoff. For example, withdrawing from a 401(k) to pay down a mortgage can lead to taxes and penalties that outweigh the benefits.
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David N. Waldrop, CFP®
Owner of Bridgeview Capital Advisors, Inc. a Registered Investment Advisor.
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