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The short answer: yes, private mortgage insurance (PMI) can be removed when you refinance.

In most cases, PMI is cancelled automatically once the homeowner has reached 22% equity in the home – which is the same thing as “78% loan-to-value ratio (LTV).” You’ll see both terms used, so don’t be confused. It’s like saying “you’ve paid 22%” versus “you owe 78%.” In the end, it’s the same.

You can also cancel PMI earlier once you have 20% equity, but you will need to submit a request because it’s not automatically removed until 22%.

Let’s say you’re not close to having 20-22% equity in your home, based on your current financing. If you’re considering refinancing because interest rates have dropped since you took out your mortgage, then your new loan balance may end up being less than 80% of the home’s value. That means you won’t have to include PMI as part of your new financing. However, removing PMI is not a reason to refinance. Refinance if you can get a better interest rate that will reduce your payments and consider removing PMI as an extra benefit.

If you have question about your mortgage refinancing options, contact a Caliber Home Loans, Inc. ("Caliber") Loan Consultant.

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