How to get rid of private mortgage insurance

From CBS Marketwatch today comes an article on how to get rid of private mortgage insurance. PMI is an antiquated way for people to purchase a home with a less than 20% downpayment. Now lenders do two mortgages to avoid this insurance, which is not tax-deductible.

"Q. There are a few things I do not understand about private mortgage insurance. The most important is, can the borrower initiate the elimination of PMI?"

"Answer: Yes, you have to initiate the process (at least until the loan's balance is paid down to 78% of the home's value at the time it was purchased). And yes, the lender has to approve, but only until an 80% loan-to-value ratio is reached. Then, the Homeowners Protection Act of 1998 kicks in, requiring lenders to automatically cancel coverage if you ask for it."

In the recent home market, if you purchased your home more than a year ago in San Francisco (and actually got stuck with PMI), then there's really no reason you should still be paying it. Call your bank/lender immediately and demand that they drop it.

"Under the law, the lender must cancel coverage at the borrower's request when the loan is paid down to 80% of the property's original value. But if you forget to ask, policies must be terminated automatically when the loan balance reaches 78% of the home's value at the time it was purchased."

What this doesn't account for is property appreciation. You may need to get a new appraisal to prove to the bank that your house has increased in value, thereby making your equity greater than 20% of the home's value.

Never hurts to look into it, right?