How Can I Remove Private Mortgage Insurance (PMI)?

REMOVE Private Mortgage Insurance (PMI)

Federal law sets rules to remove private mortgage insurance for many mortgages under certain circumstances. Some mortgage lenders and servicers may also allow for earlier removal of PMI under their own set of guidelines.

The federal Homeowners Protection Act (HPA) governs when Private Mortgage Insurance (PMI) can or will be removed from a loan under certain circumstances. The law provides two ways to remove PMI from your home loan:

Request PMI Cancellation

You have the right to request that your mortgage company or servicer cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to reach 80% of the value of your home originally used for your current mortgage. This date should have been given to you in writing on a PMI disclosure form when you received closed on your mortgage. If you can't find the disclosure form, contact your servicer.

You can ask to cancel PMI earlier if you have made additional payments that reduce the principal balance of your mortgage to 80% of the original value of your home. For this purpose, the original value generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower (or, if you have refinanced, the appraised value at the time of your refinance).

There are other important criteria you must meet if you want to cancel PMI on your loan:

Automatic PMI Termination

Even if you don't request to cancel PMI, your servicer still must automatically remove private mortgage insurance on the date when your principal balance is scheduled to reach 78% of the original value of your home. For your PMI to be canceled on that date, you need to be current on your payments on the anticipated termination date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.

Final PMI Termination

There is one other way you can stop paying PMI. If you are current on payments, your lender or servicer must end the PMI the month after you reach the midpoint of your loan's amortization schedule. (This final termination applies even if you have not reached 78% of the original value of your home.) The midpoint of your loan's amortization schedule is halfway through the full term of your loan. For 30-year loans, the midpoint would be after 15 years.

This standard for ending the PMI halfway through the loan's term is more likely to occur for people who have a mortgage with an interest-only period, principal forbearance, or a balloon payment. Keep in mind that you must be current on your monthly payments for termination to occur.

Other Things to Know about the Homeowners Protection Act

Loan investors, including Fannie Mae and Freddie Mac, often create their own PMI cancellation guidelines that may include PMI cancellation provisions beyond what the HPA provides. But these guidelines cannot restrict the rights that the HPA provides to borrowers. For example, the HPA does not contain any requirements for a loan's tenure before a borrower may request cancellation or be eligible for automatic PMI termination (known as a seasoning requirement). Note: The rights in the Homeowners Protection Act apply to mortgages related to single-family principal residences that closed on or after July 29, 1999. If you have a Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) loan, the HPA does not apply. If you have questions about mortgage insurance on an FHA or VA loan, contact us, your Utah mortgage broker.

If you have lender-paid mortgage insurance, different rules apply.

For additional information about how to remove private mortgage insurance please contact one of our mortgage professionals at 891.272.0600.