Private Mortgage Insurance (PMI) protects a lender when a conventional loan is made with less than a 20% down payment. Because the borrower’s equity is low, the lender requires PMI to offset the risk of default.
Why PMI Can Be Cancelled
As you pay down the mortgage, your equity grows and the loan‑to‑value ratio (LTV) drops. Once the loan is sufficiently secured by the property, the extra insurance is no longer needed.
Standard PMI Cancellation Rules
- Automatic termination: Most lenders are required by federal law to automatically cancel PMI when the loan reaches 78% LTV, provided you are current on payments.
- Borrower‑initiated request: You can ask the lender to remove PMI once the balance reaches 80% LTV. The request must be in writing.
Steps to Remove PMI in Tennessee
- Check your loan documents or contact your servicer to confirm the exact LTV threshold and any additional requirements.
- Gather proof of the current balance—usually a recent payoff statement from your lender.
- If needed, order a new appraisal to confirm the home’s current market value. Some lenders accept a home‑equity line of credit statement instead.
- Submit a written request to your servicer, attaching the balance statement and, if required, the appraisal.
- Follow up to ensure the servicer processes the cancellation and stops the monthly PMI charge.
Tennessee‑Specific Considerations
Tennessee has no state income tax, which can make it easier for homeowners to allocate more of their cash flow toward paying down the mortgage faster, potentially reaching the 80% LTV threshold sooner. Additionally, most real‑estate closings in Tennessee are handled by title companies rather than attorneys, so the paperwork for a new appraisal or payoff statement is typically coordinated through the title company.
This article provides general information and should not be taken as personalized financial advice.