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How to Get Out of PMI
by Kimberly Lankford

I thought private mortgage insurance could be dropped once equity hit 22%. My house was appraised for $230,000 and I owe just $122,000. I have good credit history, but my lender still won't cancel the costly PMI. What can I do?

For loans taken after July 29, 1999, the lender is generally required to drop PMI when equity reaches 22% of the property's value at the time you took out the mortgage. But in figuring your equity, the lender doesn't have to count any appreciation in value. Only your down payment and the principal portion of your monthly payments are considered equity. That could be your problem. (Some lenders do take appreciation into account on request, but they aren't required to do so.)

One way to get out of paying PMI is to refinance. Based on your equity in the house and your good credit history, you shouldn't have a problem getting a new loan that doesn't require PMI, says Dave Herpers, director of consumer affairs at Amerisave Mortgage. Of course, refinancing only makes sense if the money you save by lowering your rate and eliminating PMI exceeds the closing costs on the new loan. To run your numbers, see our Am I Better Off Refinancing? calculator.