The passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans.
However, by law a homeowner can request PMI be removed when the principle amount is 80% and the PMI must be dropped. So, savvy home owners can get off the hook sooner than expected.
1. Pay Attention To The Details
When obtaining the loan, the lender may have required a time limit of which you cannot remove PMI before two years. Check with the lender to see if this is the case.
2. Prepay On Your Loan
It can take several years to arrive at the point where the principal is only 80% of the original loan amount, but even $50 extra/month can mean a large drop in your loan balance over time.
3. Remodel
Increase your home’s market value by updating kitchens, bathrooms and flooring, or adding a room or a pool. Then it’s a matter of recalculating your loan-to-value ratio using the new value figure.
4. Get An Appraisal
The toughest thing for many consumers to figure out is just when their home's equity goes over the 20% point.