To remove PMI, or private mortgage insurance, you must have at least 20 percent equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80 percent of the home’s original appraised value.

Here are steps you can take to cancel mortgage insurance sooner or strengthen your negotiating position:

  • Refinance: If your home value has increased enough, the new lender won’t require mortgage insurance.
  • Get a new appraisal: Some lenders will consider a new appraisal instead of the original sales price or appraised value when deciding whether you meet the 20 percent equity threshold. An appraisal generally costs $450 to $600. Before paying for an appraisal, ask the lender whether this tactic will work to get rid of PMI for your loan.
  • Prepay on your loan: Even $50 a month can mean a dramatic drop in your loan balance over time.
  • Remodel: Add a room or a pool to increase your home’s market value. Then ask the lender to recalculate your loan-to-value ratio using the new value figure.