Question:

How can I cancel PMI (private mortgage insurance)?

Answer:

The Homeowner's Protection Act (HPA) of 1998 establishes provisions for requested or automatic cancellation of private mortgage insurance (PMI) on loans issued after July 28, 1999.

Private mortgage insurance is obligatory for borrowers with less than 20% down payment but before the HPA set guidelines for PMI cancellation, borrowers were seldom aware they could drop their private mortgage insurance payments once they built 20% equity. This lead borrowers to paying $300 to over $1,000 annually for years when there was no need to do that.

The Homeowner's Protection Act (HPA) of 1998 establishes rules that split responsibility for cancelling PMI (private mortgage insurance) between borrower and lender once the 20% equity was reached.

Now, borrowers are advised to seek to cancel PMI once they reach 80% LTV level. The lender will require that you have not been 30 days late with your mortgage for the last year, or 60 days late for the previous two years, nor have another mortgage or equity loan.

As far as lenders have responsibility to cancel PMI, they have to do it when the loan reaches at most 77 percent of the mortgage amount. If at that point you are late with payments, the cancellation will come into effect as soon as you become current.

If private mortgage insurance has not been terminated for some reason in the abovementioned ways, it has to be cancelled not later than the chronological midpoint of the loan. For a 20-year loan this will occur at the 120 payment. PMI has to be cancelled shortly after this date if you are current on payments.

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