Private mortgage insurance protects your lender, not you, and stays on your bill until you ask to drop it or the lender’s schedule ends it. Once your balance reaches 80% of your home’s original value, ask your servicer in writing to cancel it. If your home has gained value, a new appraisal can get you there sooner.
Freddie Mac puts the cost at roughly $30 to $70 a month for every $100,000 borrowed, so a $300,000 mortgage can carry $90 to $210 a month in PMI. Every month you pay it after you qualify to cancel is money spent protecting someone else.
Federal rules draw two lines. Your servicer has to end PMI automatically when your balance is scheduled to fall to 78% of the home’s original value, which generally means the lower of the purchase price or the appraisal when you bought. You can ask to end it at 80%, and extra principal payments count toward that line, so you can reach it before the schedule does.
Rising home prices can get you out sooner still. That route comes from whoever owns your loan, not from the law. Fannie Mae’s rules, for example, allow cancellation with a new appraisal once you owe 75% or less of today’s value after two years of payments, or 80% after five, and you pay for the appraisal.
FHA loans play by different rules. On FHA loans made since mid-2013 with less than 10% down, the mortgage insurance lasts as long as the loan does unless you refinance out of it.
To cancel PMI on a conventional loan, send your servicer a written request. Expect it to check three things:
- You’re current on your payments, with a clean recent history.
- There’s no second mortgage or home equity line on the house.
- The home hasn’t lost value since you bought it, which may take an appraisal.
Call your servicer this week. Ask for the date your PMI comes off on schedule, and what it would take to drop it now at today’s value.
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