Private mortgage insurance or PMI is considered an authentic insurance coverage provided by insurance companies to the mortgage lenders. In case, a borrower fails to make loan payments and his property gets listed for foreclosure, then the insurance provider will compensate the lender against any deficiency in the amount made from such foreclosure. These insurance policies are termed as private because they are meant to cover private mortgage lenders and not government-sponsored lenders or lending institutions. People with 70%, 60%, or lower loan to value (LTV) ratio have to include PMI in their mortgage loan.

Therefore, people who have mortgage loans clubbed with a PMI need to find ways of getting rid of it.

Steps to avoid paying the PMI

There are several ways by which one can evade paying for PMI:

1. Affordable mortgage refinances - Prior to refinancing the existing mortgage loan, one should analyze the pros and cons of mortgage refinance. Moreover, one should compare the offers of more than mortgage lenders who are willing to refinance a mortgage loan. Borrowers should ask for refinance quotes from the lenders in accordance to their remaining term of the existing loan. Furthermore, they must enquire about any inclusion of a PMI in the refinanced mortgage. If the refinanced mortgage does not have the PMI, then it is worth refinancing the loan.

Apart from those, one should be eligible for a mortgage refinance with low rate of interest. In case of credit reports, one must take care to improve his/her credit rating. This will help borrowers to get a new refinanced mortgage with a PMI limit of not more than 80%. However, it should be noted that mortgage refinance does not costs more than what one can save as a result of it.

2. Affordable Loan to Value ratio - Generally, borrowers with a mortgage loan that has PMI limit of 80% or as specified by the current lender, may be eligible for a PMI waiver. Almost all the mortgage lenders waive off PMI with an existing limit of 78%. Borrowers need to keep a tab on their property's present market value. This will help them when a lender calculates the LTV as per the original mortgage price. It is good to conduct an appraisal through an accredited mortgage professional and submit the appraised value to the lenders.

This will be a judicious choice to have a professional appraisal done for one's house, even if it costs some dollars. This is because one can save way too much money, if refinance helps in to drop the PMI on a new mortgage loan.