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Cancelling PMI: How to Know When You Qualify

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If you have a conventional loan established with Private Mortgage Insurance (PMI) at closing, PenFed will automatically remove your PMI once your mortgage reaches 78% loan to value based on the original amortization schedule. This provision is made under the terms outlined in the Homeowners Protection Act of 1998 (HPA).

Here's an example:

  • $200,000 original property value
  • $180,000 beginning mortgage balance (90% LTV)

Over the last several years, you've reached the date your original amortization projected your loan balance would be 78% of the original value.

  • $156,000 projected balance (78% LTV)

At that point, PenFed would remove your PMI automatically if you are current on your payments. You don't need to make a request. Please be advised that you are unable to pay down your loan to reach the 78% LTV for automatic termination; this is solely based on the date provided on the PMI Initial Disclosure in the case of fixed-rate loans. For ARM loans, you may receive a notice after closing from your mortgage servicer if the initial date and amortization schedule are not known at closing.

The other way to get your PMI removed is to submit a request if you think your property value has gone up or if you have reached your 80% cancellation date (scheduled or actual). Your mortgage servicer will provide you with an annual notice about your right to cancel PMI.

Before you submit a request, make sure you meet the following conditions.

Four Conditions for PMI Removal

1. Conventional Mortgage

You have to have a conventional mortgage (not an FHA) to get your mortgage insurance removed. In most cases, FHA's mortgage insurance remains for the life of the loan. In the case of lender-paid PMI, you will not have automatic termination or borrower-initiated cancellation rights.

2. Number of Units

The mortgage must be on a one-unit principal residence or second home. That includes a single-family home, condo, townhome, or one side of a duplex.

If you have a one-to-four-unit investment property or a two-to-four-unit that's your principal residence — you'll need to have 30% equity (70% LTV).

3. Loan Age

The date on which your loan reaches 80% (20% equity) is called the cancellation date. Whether you reach 80% on the originally projected schedule or after, you can request the cancellation of PMI by your lender.

In order to cancel PMI, you will need to:

  • Submit a written request to your lender
  • Exhibit a positive payment history (see condition 4 below)
  • Be up-to-date on your current payments

In addition, depending on your mortgage servicer's requirements, you may need to provide evidence that the value of your property has not declined during the period of ownership and that there are no subordinate liens on the property's title. If an appraisal and lien search is required, the associated expenses would be paid by the homeowner.

Assuming that you are current on your loan payments, PMI ends automatically on the original 78% amortization date.

4. Satisfactory Payment History

You have a good payment history. That includes:

  • Within the last 12 months, your payment wasn't 30 or more days past due.
  • Within the last 24 months, your payment wasn't 60 or more days past due.

Once we get the request, we'll review your mortgage to see if you qualify for having your PMI removed. If you are eligible, PenFed will remove it within 30 days of receiving your property's value.

Increased Property Value

In addition to your rights under the HPA, there is yet another way in which you may be able to apply for PMI cancellation based on the current value of your property.

If your property value has increased so that you have 20% or more equity, your loan to value (LTV) would be 80% or lower. Although you can get a rough idea of your home's value from Zillow, Redfin, or Realtor.com, PenFed will need to verify the value and may order an appraisal. If applicable, this appraisal would be paid by the homeowner.

Here's an example:

  • $200,000 original value
  • $180,000 beginning mortgage balance (90% LTV)
  • $240,000 current property value (and you've been making payments)
  • $170,000 current balance (70.83% LTV)

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