When and how to request private mortgage insurance (PMI) cancellation from your lender
When you purchase a home using less than a 20% down payment, lenders typically require private mortgage insurance (PMI) to be part of your loan terms. Mortgage insurance is an additional fee, calculated as a percentage of your loan balance, that is added to your monthly payment. Because a lower down payment represents a repayment risk, PMI protects your lender in case you default on payments in the future.
Now, PMI doesn’t last forever for *conventional mortgage loans. The Homeowners Protection Act provides you options to remove PMI from your home loan.
There are two types of termination required by the HPA: automatic and final.
- The HPA requires lenders to remove PMI automatically when your loan balance is first scheduled to reach 78% or less of the original value. Original value is the lesser of the sales price or appraised value at the time of purchase. Borrowers must be current on their mortgage payments.
- The HPA also requires lenders to remove PMI once you reach the halfway mark on your loan term (ex. 15 years on a 30-year loan). Final termination applies even if you have not reached 78% of the original value. Borrowers must be current on their mortgage payments.
The law also protects your right to request PMI cancellation before meeting the criteria for termination. If you wish to remove PMI, you must have a good payment history and be current on your loan. Your lender also may require a new appraisal to ensure the present value of your home is not lesser than the original value.
- You can request PMI cancellation when the principal balance on your mortgage loan is scheduled to reach, or actually reaches, 80% of the original value. This date should be listed in your closing documents.
- If you made extra payments toward your principal balance, you may reach the 80% threshold earlier than the date above so you can ask to cancel PMI.
If you have not yet met the termination/cancellation criteria under law, some lenders may allow for an earlier request for PMI cancellation. For example, if home improvements or current market activity has increased the value of your home, you may be near the 80% threshold. Typically, your lender will ask for a list of improvements with cost and completion date in conjunction with a new appraisal.
PMI cancellation guidelines may vary by lender, but those guidelines cannot restrict your rights provided by the termination/cancellation criteria in the HPA. If PMI is required for your loan, discuss cancellation scenarios with your loan advisor in advance to better understand what you can do in the future.
*If you have a government-backed mortgage loan, like a Federal Housing Administration (FHA) or Veterans Affairs (VA) loan, different rules apply.