In order to remove private mortgage insurance (PMI) you pay on your mortgage loan, you must be up to date with your monthly payments. If you are, and if your mortgage closed on or after July 29, 1999, federal law generally provides two ways for you to remove PMI from your loan: (1) reqest PMI cancellation or (2) PMI termination.

 

Request PMI cancellation

The Homeowners Protection Act gives you the right to request your lender cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. This date should have been given to you in writing on a PMI disclosure form when you received your mortgage. Contact your lender if you cannot find the disclosure form.  If you have made additional payments to reduce the principal balance of your mortgage to 80% of the original value of your home, you can request this earlier.

If you meet these requirements your servicer generally must cancel your PMI when you request it:

  • Your request must be in writing.
  • You must have a good payment history and be current on your payments.
  • Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.
  • Your lender can also require you to provide evidence, such as an appraisal, that the value of your property has not declined below the value of the home when you first bought it.  If the value of your home has decreased, you may not be able to cancel PMI.

If you have made a lot of home improvements and/or your home has appreciated enough to have 20% equity in your home, you can request in writing to your current lender-servicer that the PMI be cancelled. Ask them to order an appraisal to verify the equity if you are depending on appreciation or home improvement to earn the equity.  If you have paid on the mortgage to such a point that you have 20% in equity, they can cancel without an appraisal.

 

Automatic PMI termination

Even if you don’t ask your lender to cancel PMI, your lender still must terminate PMI on the date when your principal balance is scheduled.  You must be current on your payments on the anticipated cancellation date, otherwise PMI will not be terminated until shortly after your payments are brought up to date.

 

Final PMI termination

Your lender must terminate PMI if you reach the midpoint of your loan’s amortization schedule before the date. The midpoint of your loan’s amortization schedule is halfway through the life of your loan. Most loans are 30-year loans, so the midpoint would occur after 15 years.  You must be current on your monthly payments for termination to occur.

If your loan is guaranteed by the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA), these rules generally won’t apply.  If you have questions about mortgage insurance on an FHA or VA loan, contact your provider.

Contact Seth Jenson at 720-989-1210 or seth@jensonteam.com when you need an experienced, knowledgeable realtor who loves Denver and knows the community well.

Photo Credit: Money Crashers