7 Ways to Cancel Your P.M.I. (Private Mortgage Insurance) (2024)
Posted on Published:
Did you know that many people are paying a monthly payment of anywhere between $50 – $400+ per month for insurance that doesn’t even benefit them? Yep, it’s called private mortgage insurance or PMI. This insurance benefits your lending institution if you default on your loan. If you have bought a home and put less than 20% down on the home, you are most likely paying PMI. PMI is wrapped up in your mortgage payment so many people don’t even realize they are paying it.
But if you are paying for PMI there is good news and bad news.
The bad news is that PMI is required for those who don’t put 20% down on their home when they purchase it.
The good news is that the bank is required to stop charging you in certain circ*mstances.
First, if you have paid down your mortgage to 80% of the original loan, you can call your lending institution and request that the PMI be canceled.
Second, if you haven’t paid your mortgage down to 80% but have done improvements to your home that increased the value, you can have your home appraised. If the amount remaining on your mortgage x 1.25 is less than the new appraised value of your home, you can request that the PMI be canceled.
For example, say you owe $170,000 on your home and it just appraised for $220,000 due to a home remodel. Take $170,000 x 1.25= $212,500. $212,500 is less than the value of your home ($220,000) so you can request your PMI to be canceled.
Third, if prices have gone up in your area since you purchased your home, you can have your home appraised. If the amount remaining on your mortgage x 1.25 is less than the new appraised value of your home, you can request that the PMI be canceled.
For example, I bought a fixer-upper home (before and after photos here) for 40k more than the appraisal value (explanation of why here) and began paying PMI on the home loan. Then the market went up quite a bit just as we had completed our renovation. We had the home officially appraised by a certified appraiser and our equity went up to 70k. Our loan to new value was such that we were able to get our PMI removed.
Fourth, if you have paid for your loan for half of its time-frame/schedule (15 years on a 30 year loan), you can request that the PMI be canceled.
For example, say you have a balloon interest loan or a loan which is heavily front weighted in interest, you may have made payments for 15 years on a 30 year loan and not yet reached the 20% equity required to cancel PMI. Despite not owning 20% equity, once you hit the half way mark on the loan you can request PMI cancellation.
Fifth, start paying extra towards the principal and speed up the time frame you have until you own 20% equity in your home. I show in this post 3 secrets to save over $100,000 on your mortgage that banks don’t want you to know abouthow quickly gaining equity can happen by upping payments to principal.
Sixth, If you will end up being able to put down 20% on your new loan, you could try refinancing. Refinancing can be a costly decision. Before you refinance read my Pros and Cons of refinancing here.
Seventh, Wait until you have paid off 22% of your loan and your lender will automatically (as is required) terminate the PMI on your loan. Going this route will cost you months of PMI payments when you could technically request a cancellation once you have paid off 20% of your loan instead of 22%. So I really don’t recommend waiting till your lender automatically cancels.
Important Notes-
You must be current on your payments in order for PMI to cancel.
Your request to cancel in most cases must be in writing.
Your lender may request that you provide an appraisal. So contact your lender BEFORE paying for an appraisal and ask them what the process is to get an appraisal done that will be qualified to cancel your PMI.
With FHA loans you may have to have had the loan for at least 5 years and have paid down to 78% before they will remove the PMI. Although we had an FHA loan and it dropped with the appraisal within the first 6 months, rules are constantly changing. If you have an FHA loan ask your lender what the current rules are.
If you have a first and second mortgage and together your equity does not meet 20%, lenders are not required to drop the PMI.
The mandate to automatically remove PMI at 78% only affects new mortgages funded after July 1999. Fannie Mae and Freddie Mac have said they will apply this mandate to the older loans.
Canceling your PMI as soon as possible is a great way to put an extra $50-$400+ back into your pocket each month.
Another article or two that may be of interest:
3 Secrets to Save $102,533.35 on your mortgage that banks don’t want you to know about
Using this Simple and Free Excel file, you can calculate your real debt and determine the quickest and least expensive way to pay it off!
For other rich living tips and gourmet recipes, please subscribe, like me on Facebook, and follow me on Pinterest.
To request cancellation of PMI, you should contact your loan servicer when the loan balance falls below 80 percent of your home's original value (the contract sales price or the appraised value of your home at the time it was purchased).
To request cancellation of PMI, you should contact your loan servicer when the loan balance falls below 80 percent of your home's original value (the contract sales price or the appraised value of your home at the time it was purchased).
A borrower can request PMI be canceled when they've amassed 20 percent equity in the home and lived in it for several years. There are other ways to get rid of PMI ahead of schedule: refinancing, getting the home re-appraised (to see if it's increased in value), and paying down your principal faster.
Many lenders (like Fannie Mae) also require a two-year “seasoning requirement,” meaning you can't have PMI removed until you've made two years' worth of on-time payments—even if your equity has grown above 20%. If it's been less than five years, you might even be required to have 25% worth of equity.
You can typically remove PMI if market conditions lead to a significant increase in your home's value. You have to make a request with your lender and order a new appraisal.
Is mortgage insurance tax-deductible? No, private mortgage insurance isn't tax-deductible. The mortgage insurance deduction was made available again for eligible homeowners for the 2018, 2019, 2020 and 2021 tax years. It has not been renewed for the 2022 and 2023 tax years.
Dear (Servicer Name): I am requesting to cancel my private mortgage insurance. The coverage is with (Mortgage Insurance Company Name) and my mortgage loan number is (loan number). I have included documentation to support why I think the equity in my home has reached or exceeded 20%.
For instance, if your mortgage term is 30 years, after 15 years, your PMI could automatically be removed without the need to refinance. And if your mortgage term is 15 years, that means you could be done with PMI after only 7.5 years. This should be the case even if your equity isn't at 22% yet.
Once the home loan's LTV value reaches 80 percent, PMI is usually no longer required and can be requested to be removed from the monthly mortgage payment. Once a mortgage drops to 78 percent, the federal Homeowners Protection Act requires the lender to cancel PMI automatically.
Combined with paying down your loan, you could potentially have the 20% equity you need to refinance your loan without the need for PMI. This could save you hundreds of dollars a month that could be used to pay down more of your home loan principle each month or used for other things.
The rule is no payments 30 days late in the past 12 months and no 60-day late payments in the previous 24 months. Timely payments count when it comes to getting rid of PMI. Late payments can put you in a high-risk category, making canceling harder. No other liens.
Most lenders require that your LTV ratio be 80% or lower before they will cancel your PMI. Note: Some lenders express the percentage in reverse, requiring at least 20% equity in the property, for example.
Yes. You have the right to ask your servicer to cancel PMI on the date the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. The first date you can make the request should appear on your PMI disclosure form, which you received along with your mortgage.
If you've paid the principal balance below 80% of the home's original value, PMI can typically be removed. This process involves getting a new appraisal to determine the home's current value and ensuring it meets the lender's requirements under the Homeowners Protection Act.
While many borrowers choose to wait until PMI is automatically terminated per their mortgage contract, you can take steps, such as making extra payments on your loan, to have it removed early. Just make sure the potential added costs of removing PMI early make sense for you and don't outweigh the amount you'll save.
If the mortgage insurance was financed at the time of origination and is canceled prior to its maturity you may be entitled to a refund if the refundable option was chosen at the time of origination. However, if there was no refund/limited option, this would negate any option for a refund.
Yes. Even if you don't ask your servicer to cancel PMI, in general, your servicer must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments.
If you've paid the principal balance below 80% of the home's original value, PMI can typically be removed. This process involves getting a new appraisal to determine the home's current value and ensuring it meets the lender's requirements under the Homeowners Protection Act.
You can't get rid of LPMI – With conventional loans, you can typically request to have traditional PMI removed once you achieve 20 percent equity in your home. But because the cost of LPMI is baked into your interest rate, you can only stop paying for it by refinancing to a new loan.
Address: Suite 769 2454 Marsha Coves, Debbieton, MS 95002
Phone: +813077629322
Job: Real-Estate Executive
Hobby: Archery, Metal detecting, Kitesurfing, Genealogy, Kitesurfing, Calligraphy, Roller skating
Introduction: My name is Gov. Deandrea McKenzie, I am a spotless, clean, glamorous, sparkling, adventurous, nice, brainy person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
