Is There a Way to Avoid Private Mortgage Insurance?

To avoid private mortgage insurance, you must have at least 20% equity in your home. Alternatively, you can end your PMI policy when you have paid down the mortgage balance to at least 80% of the property's original value. Mortgages signed after July 29, 1999 include a requirement that PMI be terminated when the mortgage balance reaches 78% of the property value, pursuant to The Homeowners Protection Act of 1998.

There are other ways you can reduce or get rid of your mortgage insurance policy, including:

• Refinance. If your house value has increased enough, you can take out a new mortgage agreement to pay off your current mortgage and refinance your mortgage with a loan that does not require PMI.

• Get a Reevaluation. Some lenders will consider a reevaluation or reappraisal of your property and will refer to the new appraised value to determine whether you satisfy the 20% equity requirement. Note that reevaluation costs from $450 to $600. Therefore, you should check whether your lender will consider reevaluation or reappraisal before you pay to have your property reevaluated.

• Prepay Your Loan. If you prepay your loan each month, you will reduce your loan balance and build equity more quickly and reach the point at which PMI is no longer required.

• Remodel Your House. Renovating, repairing, or making additions to your house will increase its market value. The new value can lower the loan-to-value ratio and potentially remove the PMI requirement.