What’s PMI? It stands for Private Mortgage Insurance. This is the insurance cost added to your mortgage payment if you purchase a home with less than 20 percent down. PMI has made it possible for many to own homes. It covers the lender’s risk in case you go into foreclosure. Federal law requires banks to remove the cost of PMI under certain circumstances. So, how do you get rid of this additional cost to your mortgage payment?
- Generally, you can have PMI removed when you’ve paid the loan down to 78 percent – and you must have had a good payment history and be current on your loan payments.
- When the appraised value of your home shows that the value of the property is now substantially high enough that your loan amount is now less than 80 percent of the value.
In the meantime and until PMI is removed, you still might be able to deduct your PMI costs from your income tax obligations.