How Do I Cancel Private Mortgage Insurance (PMI)?

Mortgage insurance is a product that is used by many San Diego home buyers to purchase a home with less than 20% down payment. The PMI protects the lender in the event of a loan default.  Buying your home with the help of PMI was crucial as lenders would normally not fund your mortgage with less than 20% down payment.

Now that you own the home, how do I get rid of that darn monthly payment?

How can I cancel my PMI?

Under the Federal Homeowners Protection Act (HOPA), PMI must be cancelled once your balance is scheduled to drop to 78% of the original value of your property.  In other words, it occurs when you’ve paid 22% of the principal of the original loan. However, you may be able to cancel the coverage even earlier- when your loan balance reaches 80% of the original loan amount.

There are several factors that can negatively affect your ability to cancel PMI, including:

  1. Loan payments are not current.
  2. History of late or missed payments (a payment more than 30 days late in the past year, or more than 60 days late in the past two years).
  3. Property has declined in value.
  4. Property has an existing second mortgage or home-equity loan.
  5. Loan closed before July 29, 1999 (different rules may apply).
  6. Loan is exempt from cancellation laws (for example, FHA loans and some VA loans).
  7. PMI is lender-paid, rather than borrower-paid.

Three easy steps to remove your PMI:

  1. Contact your mortgage servicer for cancellation requirements (You will need your loan number, Social Security number and property address when contacting them).
  2. Be prepared to provide additional information to servicer or arrange for appraisal.
  3. Make a written request for mortgage insurance cancellation per HOPA guidelines, and then allow time for response from servicer.

Learn more about the PMI removal process from the FDIC Compliance Manual.

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