Private mortgage insurance is paid by the borrower to protect the lender. It has nothing to do with protecting you. And in Greater Boston, where home values have appreciated significantly over the past several years, a substantial number of homeowners who are still paying PMI have already crossed the 80 percent loan-to-value threshold that makes them eligible to cancel it, they just have not asked.
May is one of the best times to act on PMI removal for one specific reason: spring appreciation.
What Spring Does to Your LTV Ratio
Your loan-to-value ratio, the outstanding mortgage balance divided by the home's current appraised value, determines whether you qualify for PMI cancellation. When home values appreciate, your LTV improves even if your mortgage balance has not changed significantly. Greater Boston home values have appreciated meaningfully over recent years, and spring market activity produces the strongest comparable sale evidence of the year.
An appraisal commissioned in May benefits from the richest pool of comparable sales. Spring transaction volume is the highest of the year, and the comparable sales appraisers use to establish your home's current value are the most recent and most market-representative. A May appraisal is not inherently higher than a February appraisal, but it is better-supported, which means the appraiser can produce a well-documented value that accurately reflects current market conditions.
The Homeowners Protection Act and Your Rights
Under the Homeowners Protection Act of 1998, borrowers with conventional loans have the right to request PMI cancellation when the outstanding principal balance reaches 80 percent of the original value, typically the original purchase price or the original appraised value at the time of loan origination. Lenders are required to respond to a written request and, if the LTV requirement is satisfied by an appraisal they approve, to cancel the PMI.
Lenders are not required to contact you when you cross the threshold. They are required to cancel PMI automatically only when the balance reaches 78 percent of the original value through scheduled amortization, not through appreciation. If your home's value has risen enough to push your LTV below 80 percent based on current market value rather than original purchase price, you must initiate the request. The lender will not do it for you.
The Appraisal as the Key Document
A lender accepting a PMI removal request based on current appraised value will typically require a professional appraisal, and they will often have requirements about who produces it. Understanding your lender's specific process before commissioning an appraisal prevents wasted fees. Once you have the lender's requirements, the appraisal process is straightforward: a certified residential appraiser inspects the property and produces a USPAP-compliant market value opinion.
If the appraised value establishes an LTV at or below 80 percent, the documentation goes to the lender with the formal cancellation request. The monthly PMI savings begin the following billing cycle.
How Much Can You Save?
PMI premiums typically run between 0.5 and 1.5 percent of the loan amount annually, depending on the loan type, down payment, and lender. On a $700,000 loan, that is $3,500 to $10,500 per year, $292 to $875 per month. For many Greater Boston homeowners, the appraisal fee required to document the LTV improvement pays for itself in a single month of eliminated PMI.
Ready to Get Started?
Whether you are a homeowner, estate attorney, realtor, or investor in Greater Boston, Adam Wiener and the Aladdin Appraisal team deliver USPAP-compliant appraisals you can rely on. Call today: (617) 517-3711 | info@aladdinappraisal.com | aladdinappraisal.com
