How to Eliminate PMI Insurance on your Mortgage

Did you know there are 3 ways to get rid of your PMI payments on your mortgage?  These are extra payments made to insure the loan because the borrower did not have enough of a down payment at the time of the original loan. According to Keegan Mortgage, a lender Sage has used often with success, they are:

1.     Cancellation using original value

The Homeowners Protection Act of 1998 (HPA) covers single-family primary residences whose sales were closed on or after July 29, 1999. HPA provides fortwo types of PMI : borrower-requested cancellation and lender required cancellation.

2.   Borrower-requested cancellation

Borrowers must provide a written request for PMI cancellation to the lender, who cancels the policy:

• The date the mortgage loan balance is first scheduled to reach 80% of the original property value, based solely on the initial amortization schedule, regardless of the outstanding balance of the loan OR

• The date the mortgage loan balance actually reaches 80% of the original value

For a purchase transaction, original property value is the lesser of the property sales price and appraised value. For a refinance transaction, original value is the appraised value.

Lenders can cancel PMI coverage only if:

• The borrowers satisfy any lender requirements for evidence the property value has not declined and no subordinate liens exist AND

• The borrowers have a good payment history:

- No payment 60 days or more past due during the 12-month period beginning 24 months before the date the mortgage loan reaches the cancellation date, AND

- No payment 30 days or more past due during the 12-month period before the date the mortgage loan reaches the cancellation date

3.   Lender-required cancellation

The lender must automatically cancel the PMI policy:

• The date the mortgage loan balance is first scheduled to reach 78% of original value, based solely on the initial amortization schedule2 , regardless of the outstanding loan balance AND

• If the borrowers are current on the payments required by the terms of the mortgage Different cancellation requirements apply to loans designated at origination as "high risk."

2.     Cancellation using current value

HPA does not address PMI cancellation using current value, but individual investors may request MI cancellation in writing and provide a current value estimate acceptable to their lender.

Fannie Mae and Freddie Mac typically require:

• A loan seasoned at least 2 years, and

• The borrowers have an acceptable payment history, and

• The LTV based on a current appraisal is:

- 75% or lower if fewer than 5 years have elapsed since the loan originally closed or

- 80% or lower if more than 5 years have elapsed since the loan originally closed

Borrowers should contact their lender to cancel their mortgage insurance coverage.

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