About PMI

If you put less than 20% down when you purchased your home, you're likely paying Private Mortgage Insurance. The good news? You may be able to have it removed — and a professional appraisal is the key.

What Is PMI?

Lenders traditionally require a down payment of at least 20% of a home's value. When borrowers put down less — whether 10%, 5%, or even 0% — the lender faces more risk. To offset that risk, these transactions require Private Mortgage Insurance (PMI), a supplemental policy that protects the lender if the borrower defaults.

The cost of PMI — often $40 to $50 per month for every $100,000 of home value — is commonly rolled into the mortgage payment. Given the size of the overall payment, this additional fee is often overlooked. Homeowners may continue paying PMI long after their loan balance has dropped below the 80% threshold.

When Can PMI Be Removed?

Under the Homeowners Protection Act, lenders are generally required to terminate PMI when the principal balance reaches 78% of the original loan amount. Savvy homeowners can request removal even sooner — the law stipulates that upon the homeowner's request, PMI must be dropped when the principal reaches 80%.

Certain conditions must be met, such as being current on loan payments. The law applies to home loans that closed after July 1999, though most lenders will work with earlier borrowers as well.

How Home Appreciation Helps

There's another way to reach the 80/20 threshold besides paying down your principal: home value appreciation. Many areas of Arizona have seen significant gains in property values. Even modest appreciation may mean your home equity now exceeds 20%, making you eligible for PMI removal.

How We Can Help

The hardest part for most homeowners is knowing when their equity crosses that 20% threshold. A certified, licensed appraiser from Norris Property Consultants can help. We know the market dynamics of the Phoenix metro area and can provide a professional valuation that demonstrates your home's current worth. With this data, your mortgage company will most often eliminate the PMI with little trouble.

The savings from dropping PMI typically pays for the cost of the appraisal in just a few months — after which you enjoy the savings from that point forward.