How to Cancel PMI - Private Mortgage Insurance

Here are the rules put forth for cancelling PMI once you have enough equity in home that you are no longer required to continue making the monthly insurance premium payments. Prior to the creation of the Homeowners Protection Act of 1998, lenders did not have to terminate the collection of PMI payments until the borrower asked them to cancel it.

Many lenders cancelled the PMI when it was no longer needed, but there were companies who just kept on collecting the money, taking advantage of borrowers who just did not understand that it was no longer needed. A borrower who was paying $80 a month in Private Mortgage Insurance premiums paid out $960 every year.

The Homeowners Protection Act of 1998 (HPA)
The Act gives specific details about how to cancel or terminate your Private Mortgage Insurance Premiums. The Act does not apply to:

• Mortgages signed before July 29, 1999
• VA or FHA loans
• Lender Paid MI loans
  
  There are also different rules for:
  
• "High Risk Loans" and Non-Conforming Loans - yes, this means Jumbo Loans too!
  

Cancellation of PMI
You may request that the PMI be cancelled when your mortgage has been paid down to 80% of the value of the home with restrictions.

• This value is based on the original purchase price or appraisal
• You cannot have been 30 days late in the past year or 60 days late in the past 24 months
• The request may be denied if you have a 2nd mortgage or Home Equity Loan

If you put less than 20 percent down on a home mortgage, lenders often require you to have Private Mortgage Insurance (PMI). PMI protects the lender if you default on the loan. The Homeowners Protection Act of 1998 - which became effective in 1999 - establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI.

For home mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your mortgage payments are current. Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current.

One exception is if your loan is "high-risk." Another is if you have not been current on your payments within the year prior to the time for termination or cancellation. A third is if you have other liens on your property. For these loans, your PMI may continue.

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