 TITLE: What Is Private Mortgage Insurance? CONTENT: How to Get Rid of PMI\n---------------------\nMany borrowers are grateful when PMI helps them get a mortgage with an LTV ratio greater than 80%, but most are even more thankful when they can cancel their PMI coverage. Many loans call for automatic PMI removal after the date at which your monthly payments are calculated to get you past a 78% LTV ratio (in other words, when you've paid 22% of the home's \"principal value\"). But you can request PMI removal earlier if you can show your equity in the home equals or exceeds 20% of what you paid for the property (its \"original value\").\nHow long it takes to get to an 80% LTV ratio depends on several factors:\n*   **The size of your down payment**: The closer your original down payment was to 20%, the sooner you'll get to 80% LTV. For example, with all other factors being equal, for our hypothetical $300,000 home:\nIf you put down 10% on a 30-year loan at 4.5% interest, it would take just over six years to reach 20% equity. With a 5% down payment, it would take more than eight years.\n*   **The size of your monthly payments**: You can speed up accumulation of equity (and your arrival at 20% LTV) by \"overpaying\" your mortgage each month. In addition to enabling you to end PMI payments sooner, this practice can save you interest costs over the life of the loan. Prepaying your mortgage comes with some tradeoffs, however, so consider this option carefully before you proceed.\n*   **Changes in appraised value**: Your home's appraised value can change with market conditions. If you buy in an area with rising home prices, market appreciation on your property could help you get you to 20% equity even sooner. By contrast, declining neighborhood property values could prolong the time needed to reach 80% LTV.\nBefore PMI can be removed, you typically have to pay for a new appraisal (by an appraiser selected by the lender). Lenders require this to cover them in case the house's value has dropped below its original value. Appraisals typically cost a few hundred dollars, but prices can run up over $1,000 for very large homes or properties with unique or unusual features or amenities.\nThe new appraisal determines the value of the home that's used when calculating your LTV ratio. If you've reached 80%, you can eliminate your PMI. If you're not at 80%, you can try again anytime, but you may have to pay for another appraisal. END