Canceling your Private Mortgage Insurance

Private mortgage insurance (PMI) is great for helping you purchase your home. It also protects the lender if payments on a loan stop. If your down payment is less than 20 percent of the sales price or the appraised value of the home, required PMI is added to the monthly mortgage payment.

Private mortgage insurance can be expensive, and the Homeowners Protection Act provides specific cancellation and termination rights. The Homeowners Protection Act of 1998 establishes rules for cancellation of PMI on home mortgages reducing your total monthly mortgage payment.

  • Borrowers can request cancellation at 80% Loan-to-Value (LTV)
  • PMI by law is automatically canceled when the loan reaches 78% of the original value through normal scheduled amortization

Exceptions to the rule include:

  • Delinquent payments within 1-2 years prior to the time for termination or cancellation.
  • Additional liens on your property, for these loans, your PMI may continue.

Borrower inititated termination based on original property value

  • When loan reaches 80% LTV (paying down loan amount).
  • Loan needs to be current
  • No 30 day delq in last 12 months or no 60 day delq in last 24 months
  • Servicer must “warrant” the value of the property is at least equal to the original property value by one of the following and the borrower would bear the cost:
    • a) BPO – Broker’s price opinion
    • b) A certification of value – “Drive-By” by original appraisal
    • c) A New appraisal

Borrower inititated termination based on current property value

  • When loan reaches 75% LTV if loan is between 2-5 years
  • When loan reaches 80% LTV if loan is greater than 5 years
  • IF investment property, 70% LTV
  • Loan needs to be current
  • No 30 day delq in last 12 months or no 60 day delq in last 24 months
  • New appraisal is needed

Automatic termination

  • When loan reaches 78% LTV through normal scheduled amortization (non-curtailments) or mid-point of amortization schedule.
  • Loan needs to be current
  • No appraisal needed

For more information about the requirements and guidelines for waiving PMI, contact your Loan officer or visit the Federal National Mortgage Association website.

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