How do I Get Rid of Mortgage Insurance?

by Louise Balle, Demand Media

    Though it's designed as a protection for the bank, mortgage insurance does benefit borrowers. In truth, if it weren't for mortgage insurance, a lot of people wouldn't get mortgage loans at all. This type of insurance policy reimburses the lender in case the borrower defaults and is commonly required if the borrower cannot produce a down payment of 20 percent or more. After a certain amount of time paying your mortgage insurance, you can request to have it removed.

    Step 1

    Determine the estimated value of your home. Now, you can't always go by the amount that you spent to purchase the home. Depending on how long it's been since you closed the loan (appraisals are commonly good for about six months to a year), you may have to look at recent sales of similar homes in your area to estimate the value or pay for a new appraisal.

    Step 2

    Check your most recent mortgage statement to determine your current balance due on the loan.

    Step 3

    Divide your balance by the estimated market value to get what is called your LTV (loan to value) ratio. If that figure is 80 percent (.80) or less you can proceed.

    Step 4

    Call your mortgage lender to ask him to eliminate your mortgage insurance from the loan based on your findings. You may have to write a formal letter and provide the lender with proof of your estimated home value, but the lender may go by its own estimates. The law states that a lender must automatically remove PMI when the LTV ratio falls to 78 percent or less.

    Step 5

    Receive a decision from the lender on whether it's time to remove your mortgage insurance from the loan. It could be immediate or take several weeks depending on your lender's process.

    About the Author

    Louise Balle has been writing Web articles since 2004, covering everything from business promotion to topics on beauty. Her work can be found on various websites. She has a small-business background and experience as a layout and graphics designer for Web and book projects.