How To Cancel Private Mortgage Insurance

Make the PMI cancellation request to your lender or servicer in writing. You can request to remove PMI when you reach 20 percent home equity. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Contact your mortgage company and request that they perform a market analysis of the home. All program terms and conditions are subject to change and may be discontinued without prior notice.
This is provided you are in good standing and haven’t missed any mortgage payments. Your path to removing mortgage insurance depends on the type of loan you have and its mortgage insurance LTV requirements. Your LTV, or loan-to-value ratio, basically measures how much equity you have in your home. You can calculate your LTV by dividing your current loan balance by the original value of your property and multiplying that by 100. So if you put 10% down on a 200,000 home, your initial loan balance would be $180,000 and your LTV would be 90%.

Sal Miosi joined MGIC in 1988 and is currently the President and COO of MGIC. Before then, he held a variety of leadership positions in the technology, sales and marketing divisions after joining the company in 1988. He holds an MBA from Marquette University and a bachelor's degree from UW-Milwaukee.
You decide to refinance to a new conventional loan in the amount of $200,000. Assume the new mortgage rolls closing costs and other prepaid items into the loan. With home values rising nationwide, many homeowners who are still paying for mortgage insurance will now have enough equity to cancel or refinance out of their mortgage insurance payments.

Typically, a portion of the mortgage insurance premium is paid upfront at closing, and the rest is paid as part of the monthly mortgage payment. The Act also laid down guidelines that lenders must follow even without a request from the borrowers to remove PMI. If the borrowers have good credit and have made their mortgage payments on time, the lender is required to drop PMI automatically when the loan amortizes to 78 percent of the original value of the home. Note, both the borrowers as well as the lenders’ guidelines require the original value of the home to be used, not the current value. PMI payments are calculated by the mortgage insurance company based on several factors, namely the size of your down payment (or your home equity if you’re refinancing) and your credit score.
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Mortgage insurance is maintained at the option of the current owner of the mortgage. In many cases, the lender will allow the cancellation of mortgage insurance when the loan is paid down to 80% of the original property value. However, lenders may take more than your home value into account to consider eliminating PMI. If you've had late payments in recent months, it may disqualify you from removing PMI earlier than is required by law.

The more you prepay your loan, the faster you can reach the LTV threshold for mortgage insurance elimination. "Typically, a borrower relies on the loan officer for the direction. There really isn't a consumer option for 'shopping around,'" Zimmerman explains. Michael Zimmerman is head of investor relations for MGIC Investment Corp., which underwrites private mortgage insurance to lenders in the U.S. He joined MGIC in 1995 as vice president of mortgage banking strategies. Below is a rundown of different options for avoiding private mortgage insurance.
Sign up to stay up to date with the latest mortgage news, rates, and promos. If you opened a loan on or after June 3, 2013, and your original down payment was 10% or more, your MIP will go away after 11 years. While it’s uncommon to get a USDA loan directly through the USDA, you won’t be charged a guarantee fee if you do go this route. Calculate your "loan to value" ratio using the results of the appraisal. This is a simple calculation—just divide your loan amount by your home's value, to get a figure that should be in decimal points. If, for example, your loan is $200,000 and your home is appraised at $250,000, your LTV ratio is 0.8, or 80%.
"Private mortgage insurance" protects the lender in the event that you default on your mortgage payments and your house isn't worth enough to entirely repay the lender through a foreclosure sale. Unfortunately, you foot the bill for the premiums, and lenders almost always require PMI for loans where the down payment is less than 20%. They add the cost to your mortgage payment each month, in an amount based on how much you've borrowed. The good news is that PMI can usually be canceled after your home's value has risen enough to give you 20% to 25% equity in your house.

Second, your home value could increase to the point that you now have enough equity built up to remove PMI. In this situation, your loan would need to be at least two years from the closing date to be eligible. You would then need to reach out to your lender to inquire about cancelling your PMI. The same factors as mentioned above apply here as well except that the lender is required to order a BPO at your expense to determine the new LTV of your property. First, you can make payments until you have 20% equity in your home—or an LTV of 80%—at which point you can contact your lender to inquire about removing PMI. Factors that play into this decision for the lender include loan status and payment history.
The rules are different when you want to stop paying the mortgage insurance premiums that come with an FHA loan. With these loans, refinancing may be your only option to get rid of mortgage insurance. Lenders are typically required to remove private mortgage insurance from your loan when your home equity reaches 22%. So if you don’t ask your lender to get rid of your PMI when your home equity reaches 20%, they should remove it for you once your home equity reaches 22%. You will need to be current on your loan with a good payment history to be eligible for automatic termination of PMI. The good news is that you can request your lender remove PMI once your home equity reaches 20%.
A home equity loan is a consumer loan secured by a second mortgage, allowing homeowners to borrow against their equity in their home. Using the first and second mortgage, $85 dollars can be saved per month for the first 60 months. Starting in month 61, the stand-alone first mortgage gains an advantage of $35 per month for the remaining terms of the mortgages. However, the most important variable in the decision is the expected rate of home price appreciation. This is the overriding deciding factor and, therefore, the one we will focus on now.
You pay a mortgage insurance premium instead of PMI for an FHA loan. MIP is similar to PMI and gives your lender the same refinance mortgage protections if you default on your loan. You must also pay MIP for the life of your loan if you have less than 10% down.