SAVE $200 A MONTH BY GETTING RID OF PRIVATE MORTGAGE INSURANCE (PMI)

You can eliminate private mortgage insurance once you have 20% equity in your home, but it can easily add several hundred dollars to your monthly mortgage payment. Achieving 20% equity can be achieved through extra mortgage payments, increasing the value of your home due to market conditions, or adding value yourself by remodeling your home. The cost of private mortgage insurance is added to certain mortgages on a monthly basis. It's usually required if your down payment is less than 20% of the home's appraised value. The purpose of PMI is to protect your lender should you default on your mortgage and the lender has to sell your property.

This is how you can stop paying private mortgage insurance:

Reduce Your Mortgage Payment 
Paying your mortgage on time every month is the easiest, although the slowest, a method for removing your PMI. Upon reaching an 80% loan-to-value ratio (LTV), you may contact your lender to begin the process of removing the PMI. The length of time it takes to complete this process will depend on how much money you originally put down on the property. Consider the situation in which you purchase a $300,000 home without putting any money down, and you take out a 30-year loan at a 5% interest rate. The repayment period, in this case, will be 10 years and 8 months, which will enable you to reach 20% equity in your home within 10 years. Nevertheless, if you put down $15,000 (5%), you will have 20 percent equity in eight and a half years. It is important to keep in mind that you are aiming for 20% equity. At the time of closing, mortgage lenders must inform homeowners how long it will take them to reach 80% loan-to-value if they make their regular monthly payments. It will take you longer to pay down what you owe if you want PMI off your loan sooner. If you receive a bonus at work or your tax returns, you might consider sending one-time lump sums to your mortgages. In order to get rid of PMI, small additional payments won't make much difference. It only took one month to move the date up by $100 a month. Small amounts cannot make a big difference within such a short timeframe.

Consider Home Values
The increase in the value of your home is another way to achieve 20% equity. Let us return to our example of a $400,000 home with no down payment. If the value of the home increased to $475,000, you would have 20% equity even without making a single payment. The value of the homes in your area can easily be overlooked while you are going about your daily routine.  The market value of a home you love does not really matter in your day-to-day life once you have purchased it. It is important to note, however, that if you are paying PMI, your home value may be extremely important. Thus, it is imperative that you pay attention to this information. When a comparable home sells in your area, make notes. Several weeks after the closing, you can check the new owners' price on Zillow.  As a result, you will have a better understanding of the market. Please take note that you do not want to move too quickly.  A home appraisal will be required, so make sure you actually have 20% equity before you proceed. 

Enhance The Value Of Your Home
If Investing some money upfront may be necessary if you wish to expedite the process and begin to save money over the long run. Enhancing the value of your home will contribute to the reduction of your loan-to-value ratio. In the event that your house is worth more than the loan balance and you owe the same amount on the mortgage, you are receiving closer to 80% LTV, where you will be eligible to request that PMI be removed from the loan. 
Home improvements do not always add significant value to your home. It is important to note that many upgrades do not produce any return in excess of what was spent on them. The renovation of a kitchen or bathroom will typically add value to the property, whereas things such as adding a swimming pool will not. A recent study by the National Association of Realtors indicated that exterior remodeling projects such as installing a new entry door and repainting the stucco tend to offer homeowners the greatest return on their investment. In terms of return on investment, minor kitchen remodels and attic bedroom additions rank next in importance. Depending on how lucky you are, the increased value of your neighborhood may assist you in enhancing your property's value without having to take any action on your part. 

Don't Wait For Your Lender To Contact You; Make Contact With Them Yourself
Your lender can be contacted using its general customer service phone number once you believe you have a loan-to-value of 80 percent (or less) on your home. It is important to note that each lender has its own protocol for processing requests to remove PMI. It is not uncommon for lenders to ask you to pay for an appraisal and then send it to them for review, while others will review your payment history to ensure you qualify before requesting that you pay for the appraisal. Whatever the case may be, the process is not free. A bank-appointed appraiser will visit your home, take measurements and pictures, and review comparable homes in your neighborhood. This service should cost around $400-550. Once your lender receives the appraiser's final opinion of value, the lender will be notified. The PMI will be removed if the value proves that your LTV is 80% or less. 

Each lender has its own set of rules and requirements. The majority of lenders will allow you to remove your PMI if your LTV is 80% or less, however, some require that it be 78% or less. Consequently, it is imperative that you contact the customer service department before you begin the process in order to determine what you are aiming for. In accordance with the Homeowner's Protection Act, mortgage lenders are required to cancel your private mortgage insurance once your loan has been paid down to 78% of the principal loan amount, provided the payment is current. There is an exception to this rule for conventional Fannie Mae and Freddie Mac loans, but it applies to most FHA loans. Therefore, if you do not have a deadline and would rather wait for the lender to begin the process, just keep making payments and they will contact you when the time comes.
Summary
It is imperative to have private mortgage insurance (PMI) when you are purchasing a new home because you are unable to put 20% down on the house. In either case, you will be able to pay off your mortgage faster or you will be able to put the money towards other financial goals if you are able to get rid of it as soon as possible. Using the three methods described above will allow you to reach the 20% mark as quickly as possible as long as you combine them.

By Rashmi Goel