How do I get rid of PMI?

This is a question I get a lot from clients a few years after they purchase their homes.  PMI is Private Mortgage Insurance (sometimes called MIP) - it's a monthly fee charged by your lender if you don't put 20 percent down when you buy your house.

On a personal residence you can request to remove the PMI after you have 20 percent equity in your home.  That can come from paying down the loan, or it can happen because the market value of your home has risen and you now have equity based on the new value of your home. Usually it's a combination of both.  If you think you have 20 percent equity in your home, you can make a written request to your lender.  They will probably require you to pay for an appraisal (about $350) to verify the current market value before they remove the PMI.  You also have to have a history of on-time payments or they can deny your request.

This is a great way to save money every month and once your lender eliminates the PMI they can't put it back on your loan again - even if the market value falls in the future.