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). This date appears on a PMI disclosure form that was provided by the lender.
Refinancing to Eliminate PMI
Refinancing your home loan is a strategic option when considering ways to eliminate PMI. By securing a new loan through refinancing, homeowners can leverage any increase in their home's value to remove PMI effectively.
PMI is automatically removed when your loan-to-value (LTV) ratio reaches 78%. You can request to have PMI removed from your loan when you reach 80% LTV in your home. You can achieve an 80% LTV ahead of schedule if your home's value increases or if you make extra loan payments.
There are three cancellation situations: automatic, by request, or final termination. In all cases, the property's “original value” refers to the appraised value of the home, at the time of the current loan origination.
Just multiply your original home purchase price by 0.80 for an estimate of when you'll be rid of PMI payments. If you purchased a $300,000 home, for example, you can cancel your PMI when the principal balance reaches $240,000.
All you have to do is request in writing that the private mortgage insurance be canceled (most lenders have a brief form which must be filled out) and provide the lender with proof of sufficient equity over 20%. In most cases, the necessary proof is a state certified appraisal.
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.
Ask to cancel your PMI: If your loan has met certain conditions and your loan to original value (LTOV) ratio falls below 80%, you may submit a written request to have your mortgage servicer cancel your PMI.
At the time of writing, the PMI deduction is not available. If you qualify for past years, you may still be able to deduct PMI. However, the best strategy for eliminating PMI is to pay down your mortgage and request PMI cancellation once you reach 20% equity in your home. Internal Revenue Service.
The Bottom Line: Removing PMI Can Help Ease Your Financial Burden. Mortgage insurance gives many home buyers the option to pay a smaller amount upfront for their downpayment. However, it increases the monthly payment until you're able to remove it.
No. Your loan docs will outline the terms of your PMI, but you can never cancel it based on the tax assessment. Usually the lender will either require a new appraisal or you would need to refinance.
If you're mere months away from hitting 20% equity to automatically remove PMI, you might think twice about kicking off this process. On average, an appraisal will cost a homeowner $450 to $550. The cost of an appraisal might exceed the PMI you'd need to pay to get to 80% LTV.
“After sufficient equity has built up on your property, refinancing from an FHA or conventional loan to a new conventional loan would eliminate MIP or PMI payments. This is possible as long as your LTV ratio is at 80% or less.”
Your mortgage servicer is required to cancel your PMI for free when your mortgage balance reaches 78% of the home's value, or the mortgage hits the halfway point of the loan term, such as the 15th year of a 30-year mortgage.
This means that from the start of your purchase, you have 20 percent equity in the home's value. The formula to see equity is your home's worth ($200,000) minus your down payment (20 percent of $200,000 which is $40,000). You only own $40,000 of your home.
Request PMI cancellation when mortgage balance reaches 80 percent. Another way the PMI Cancellation Act benefits you is by granting you the right to remove PMI once you have reached 20 percent equity in your home; that is, once your loan balance reaches 80 percent of the home's original value.
Your servicer is legally required to grant your request to cancel your PMI as long as you meet the criteria below: You make your request in writing. You have a good payment history and are current on your payments. You can certify that there are no junior liens (such as a second mortgage) on your home.
You can remove PMI from your monthly payment once you have 20% equity in your home. You can do this either by requesting its cancellation or refinancing the loan. The specific steps you'll take to cancel your PMI will vary depending on the type of insurance you have.
Request PMI removal: You can request the cancellation of PMI once your LTV ratio reaches 80% of the property's original value or lower. You may have to submit a formal request to your loan provider, along with documentation such as proof of home value and a solid payment history.
If you can afford it, putting 20% down on a house is ideal. It helps you avoid private mortgage insurance (PMI), reduces your loan amount, and lowers monthly payments.
Pay down your mortgage sooner to remove PMI
Multiply your original home purchase price by 0.80 to determine the amount your mortgage balance needs to be to qualify for PMI cancellation.
The Act, also known as the “PMI Cancellation Act,” addresses homeowners' difficulties in canceling private mortgage insurance (PMI)1 coverage. It establishes provisions for canceling and terminat- ing PMI, establishes disclosure and notification requirements, and requires the return of unearned premiums.
Another way to get rid of PMI is to make home improvements, such as adding a bathroom or renovating a kitchen. From there, you wait one year, then get the home appraised—hopefully for a higher value that pushes your LTV to a level where you can offload PMI.
If you meet the eligibility requirements to remove MIP from an FHA loan, your mortgage servicer should automatically cancel the premiums once you meet the criteria (a 78 percent LTV ratio or 11 years, depending on the loan). That's assuming you're in good standing with a record of on-time mortgage payments.