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Some experts say many borrowers aren't even sure whether PMI premiums are buried in their escrow payments, much less whether they might press for cancellation.
"First, you have to find out if you are paying for PMI," said Richard Roll, president of the Stamford-based American Homeowners Association. "Forty-percent of loans currently have PMI."
Experts recommend these tips for shedding unnecessary PMI:
Find out who owns your loan. Ellen Schweppe, of the Mortgage Insurance Companies of America, said a good place to start is the company servicing the loan. The servicer is responsible for collecting the payments. The servicer can then go back to the lender or investor.
Fannie Mae and Freddie Mac, which finance about 40 percent of all mortgages, have guidelines for canceling PMI. Copies of Fannie Mae's guidelines can be obtained by calling 1-800-732-6643 or writing Fannie Mae, Consumer Resource Center, 4000 Wisconsin Ave., N.W., Washington D.C., 20016. Consumers may also visit Fannie Mae's World Wide Web site at www.fanniemae.com.
Arm yourself with the facts. Look at your loan documents and see what is written about PMI. Some specify when mortgage insurance can be canceled, generally when equity reaches 20 or 25 percent.
Even if the documents say mortgage insurance must be carried for the life of the loan, you may be able to negotiate, especially if your payment history is good.
Make sure you have a good argument. If you have paid off 20 percent of your mortgage, it's clearer cut, Roll says. But if you're going to argue that the value has gone up, either because of the neighborhood or improvements you've made, an appraisal will likely be required, experts said.
The borrower generally pays for the appraisal, said Paul Havemann, of HSH Associates.
Take it slow. Havemann said going out and getting an appraisal without your lender's approval could increase your costs if the lender requires you to hire another. An alternative: Do some leg work. Research what houses like yours are selling for, he said.
If an appraisal is needed, it's a good idea to be present to point out improvements, Eisenson said.
If you want to do a pen-and-paper calculation, the American Homeowners Association offers a work sheet and an accompanying guide for $5, which covers postage and handling. Call toll-free 888-470-2242.
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