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CANCELING PMI WITHOUT

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When you have a mortgage that requires you topay PMI, it can get quite costly. The good news isthat you do not have to pay it forever; there is anend in sight. The most important factor tounderstand, however, is that you must be current onyour payments in order for any bank to considercanceling your private mortgage insurance. If youare current, there are two ways that the law helpsyou to remove PMI from your mortgage paymentwithout having to refinance into a new loan.

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REQUEST A CANCELLATIONDid you know that you have the right torequest cancelation of your PMI? Manyborrowers do not realize this and continue topay it needlessly. Your request must be inwriting to the lender and your current loan-to-value ratio must be 80 percent or lower.

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REQUEST A CANCELLATIONThere are several ways that you can determine if your LTV is at 80percent:

-The easiest way is to look at your PMI disclosure that you receivedat the closing. On that form, you will find the date that your principalloan amount is set to fall below 80 percent. Of course, this onlycounts if you have made all of your payments on time. If you havemade extra principal payments, you might hit this milestone evensooner.

-An appraisal may be necessary at the time of your request, despitethe date on your disclosure. If the values of homes in your area havedropped in the past few years, as most values did, you may have toprove that your home is not significantly lower in value as that woulddelay the date that you hit an 80 percent loan-to-value ratio.

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REQUEST A CANCELLATIONThe only time that the lender can refuse yourrequest is if you have not made yourpayments on time in the past and they feelthat the loan is still at risk for default or if thereis another lien on your home, such as asecond mortgage. Not every lender willdecline your request based on these factors,but they should be taken into considerationwhen you make your request.

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AUTOMATIC TERMINATION OF PMIIf you do not request PMI termination, the law requires thelender to automatically cancel it when you hit a 78 percentloan-to-value ratio. This date is non-negotiable, meaning thatthe lender cannot refuse to terminate your PMI even if thevalue of your home has declined. This date is set when yourloan closes and does not change. The only factor that wouldchange your ability to have it terminated is if you are notcurrent on your loan. At that point, the lender would have towait until you bring the loan current in order to cancel theinsurance. If you are scheduled to hit a 78 percent LTV afteryou are half-way through your mortgage, your PMI is requiredto be canceled, regardless of the LTV. For example, if you payyour mortgage for 7.5 years and you have a 15 year mortgage,the PMI would be cancelled at that time.

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PMI is a necessary component of a mortgage that has aloan-to-value ratio that is higher than 80 percent in order toprotect the lender from default on these mortgages. Privatemortgage insurance is the only way that borrowers are ableto put less than 20 percent down on a home and still be ableto purchase it. If Private Mortgage Insurance did not exist,then most banks would not provide loans to those that didnot have adequate assets to make a sizeable downpayment on a home. If you have PMI on your loan, it isimportant to note the date that you are able to cancel it andthen to take the necessary steps to ensure that the lenderdoes remove it from your mortgage payment.

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INFORMATION PROVIDED BY:

Justin McHood

Mortgage Commentator

Information Originally Published: 3/27/15

Justin McHood is Americas Mortgage Commentator and hasbeen providing Mortgage commentary for over 10 years.

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