Private Mortgage Insurance (PMI) is typically required when you buy a home with a down payment of less than 20%. This insurance protects the lender in case you default on your loan. However, once you have built up enough equity in your home, you may be able to get rid of PMI. One way to do this is by requesting a new appraisal of your home to demonstrate that your loan-to-value ratio is at or below 80%.
It’s important to note that not all mortgage lenders allow for this option, so it’s best to check with your lender to see if getting a new appraisal is a viable option for you. If it is, here are some frequently asked questions about getting a new appraisal to remove PMI:
1. How does PMI work?
PMI protects the lender in case you default on your loan. It is usually required if you have less than a 20% down payment when buying a home.
2. How can I avoid paying PMI?
You can avoid paying PMI by making a down payment of at least 20% when buying a home. This will eliminate the need for PMI altogether.
3. How do I know if I have enough equity to remove PMI?
You need to have a loan-to-value ratio of 80% or less to remove PMI. This means that your equity in the home needs to be at least 20% of the property’s value.
4. Can I request a new appraisal to remove PMI?
Yes, you can request a new appraisal of your home to demonstrate that your loan-to-value ratio is at or below 80%. This may allow you to remove PMI from your mortgage payments.
5. How much does a new appraisal cost?
The cost of a new appraisal can vary depending on your location and the size of your home. On average, it can range from $300 to $600.
6. How long does the appraisal process take?
The appraisal process usually takes a few weeks to complete. The appraiser will need to schedule a time to visit your home, assess its value, and prepare a report.
7. Can I choose my own appraiser?
In some cases, your mortgage lender may require you to use an appraiser that they approve of. It’s best to check with your lender before hiring an appraiser.
8. What happens if the new appraisal does not meet the required loan-to-value ratio?
If the new appraisal does not show that your loan-to-value ratio is at or below 80%, you may not be able to remove PMI from your mortgage payments.
9. Can I refinance my loan to remove PMI instead of getting a new appraisal?
Yes, refinancing your loan is another option to remove PMI. When you refinance, you can take out a new loan with a lower loan-to-value ratio, allowing you to eliminate PMI.
10. Will getting a new appraisal affect my interest rate?
Getting a new appraisal to remove PMI should not affect your interest rate. Your lender will only consider the loan-to-value ratio when determining whether to remove PMI.
11. How often can I request a new appraisal to remove PMI?
There is no limit to how often you can request a new appraisal to remove PMI. However, it’s important to consider the cost of the appraisal and whether it’s worth it to do so.
12. Can I cancel PMI after a certain number of years?
Some mortgage lenders may allow you to cancel PMI after a certain number of years, even if you haven’t reached the 20% equity threshold. It’s best to check with your lender to see if this is an option for you.
In conclusion, getting a new appraisal to remove PMI can be a good option for homeowners who have built up enough equity in their homes. It’s important to weigh the costs of the appraisal against the savings from eliminating PMI to make an informed decision. Be sure to check with your lender to see if this is a viable option for you.