PMI Removal
Private Mortgage Insurance (PMI) is an extra fee you pay if your down payment was less than 20%. Once you’ve built up enough home equity, you might be able to drop it—but the bank won’t just take your word for it. An appraisal proves your home’s value has gone up, which could save you hundreds (or even thousands) in unnecessary PMI payments.
Proving 20% Equity
Lenders typically require PMI until the homeowner has at least 20% equity in the property. If home values have increased, an appraisal can confirm that the loan-to-value (LTV) ratio has dropped below 80%, making the borrower eligible for PMI removal.
Lowering Monthly Mortgage Payments
Removing PMI reduces monthly mortgage payments, saving homeowners potentially hundreds of dollars per year.
Taking Advantage of Market Appreciation
If property values in the area have increased, homeowners may reach the required equity threshold sooner than expected, even if they haven't made extra payments.
Faster PMI Cancellation
Without an appraisal, homeowners may need to wait until their loan balance naturally reaches 80% of the original purchase price. An appraisal provides proof that they’ve reached this threshold sooner.
Avoiding Unnecessary PMI Costs
PMI is an extra expense that provides no benefit to the homeowner. Getting an appraisal to remove it as soon as possible can lead to significant savings over time.
Lender Requirements
Many lenders allow PMI removal if a borrower can prove their home's increased value through an independent appraisal.