Homeowners in Naples, Fort Myers, Bonita Springs, Estero, and throughout Collier and Lee County frequently request a PMI removal appraisal when they believe their home’s value has increased enough to eliminate mortgage insurance.
Private Mortgage Insurance (PMI) is typically required by lenders when a borrower’s loan balance exceeds 80% of the property’s value. As home values increase or loan balances decrease, homeowners may become eligible to request PMI cancellation from their lender. Many homeowners request an independent appraisal to estimate their home’s current market value before contacting their lender, helping them determine whether they may qualify for PMI removal.
It is important to note that many lenders require the appraisal used for PMI cancellation to be ordered directly through the lender or their appraisal management company (AMC). A privately ordered appraisal may not be accepted by the lender, but it can provide homeowners with an independent estimate of market value before requesting PMI removal.
What is PMI (Primary Mortgage Insurance)?
Primary mortgage insurance is an insurance policy your mortgage lender compels you to purchase when you get a loan on a house. The insurance policy protects the mortgage lender from all or part of the financial damage caused if the borrower defaults on the loan. The cost of this insurance policy varies the same way the cost of a homeowners insurance policy might vary; based on the value of your home. Primary Mortgage Insurance is typically paid for as part of a borrowers regular monthly mortgage payments, and can represent a significant amount of those payments depending on the value of the home.
How can I cancel or remove PMI from my monthly mortgage payments?
The typical rule of thumb for eliminating primary mortgage insurance from your mortgage payments is equity based. Many different lenders have different guidelines, but usually, once a borrower reaches the 80/20 threshold (meaning they only owe 80% of their home’s value in their mortgage; or they own 20% of the equity in their home), they can apply with their mortgage holder to have PMI removed. In many cases borrowers, through the normal course of inflation and market increases, will pass this threshold without even knowing it.
The bank isn’t going to let you know when you reach the 80/20 threshold – they want you to keep paying for PMI. It is the borrower’s responsibility to apply for PMI removal. The best way to know when you have reached the required threshold is to have your home appraised by a certified residential appraiser. The bank may also do their own appraisal on your home, but it is always a good idea to keep up to date with the value of your home so you know when the time is right to apply for PMI removal.
Many lenders allow borrowers to request PMI removal once their loan balance reaches approximately 80% of the home’s current market value. If property values in Naples or Fort Myers have increased since you purchased your home, a professional appraisal may demonstrate that you now meet that threshold.
Longview Appraisals provides independent residential appraisals for homeowners throughout Naples, Fort Myers, Bonita Springs, Estero, and surrounding areas of Collier and Lee County. If you believe your home may have increased in value and want an independent estimate before contacting your lender about PMI removal, Longview Appraisals can help determine your property’s current market value.