How to Request PMI Removal From Your Mortgage

Private Mortgage Insurance (PMI) is typically required when a homebuyer makes a down payment of less than 20% of the home’s purchase price. While the borrower pays for PMI, its primary purpose is to protect the mortgage lender from financial loss if the homeowner defaults on the loan. PMI adds an extra cost to monthly mortgage payments. It is distinct from homeowners insurance, which protects the property itself from damage, and solely mitigates the lender’s risk associated with a smaller initial equity contribution.

Qualifying for PMI Removal

Homeowners can pursue two main avenues for PMI removal: borrower-initiated cancellation or automatic termination. For borrower-initiated cancellation, the loan-to-value (LTV) ratio is a primary consideration, comparing the outstanding loan balance to the home’s original value. Homeowners can request PMI cancellation once their loan balance reaches 80% of the home’s original value. The original value is generally defined as the lesser of the sales price or the appraised value at the time the loan was originated. If the loan was a refinance, the original value is the appraised value at the time of refinancing.

Achieving this 80% LTV through accelerated payments can lead to earlier removal. A good payment history is also necessary, meaning no payments 30 days or more late within the last 12 months and no payments 60 days or more late within the past 24 months. The loan must also be current at the time of the request, with any outstanding late charges paid. Some lenders may require certification that no subordinate liens, such as a second mortgage or home equity line of credit, exist on the property.

The Homeowners Protection Act (HPA) of 1998 mandates automatic PMI termination for conventional loans originated after July 29, 1999. Under this federal law, PMI must automatically terminate when the loan’s principal balance is scheduled to reach 78% of the home’s original value, based on the initial amortization schedule. This termination occurs even if the borrower does not request it, provided the loan is current on payments. Additionally, for conventional loans, PMI must terminate at the midpoint of the loan’s amortization period, regardless of the LTV, if the loan is current.

Increased home value due to market appreciation or significant home improvements can also accelerate PMI removal eligibility. If a home’s value has increased, a new appraisal can demonstrate a lower LTV, potentially allowing for earlier cancellation. For loans that are two to five years old, some guidelines indicate PMI removal is possible at 75% LTV based on current market value, while for loans older than five years, an 80% LTV based on current market value may suffice. Substantial improvements, like adding a bathroom or renovating a kitchen, can increase a home’s value, potentially waiving some seasoning requirements for cancellation based on current value.

Preparing Your Request

Once a homeowner determines eligibility for PMI removal, gathering specific information and documentation is an important next step. Knowing the current loan balance is fundamental, as this figure is used in calculating the loan-to-value (LTV) ratio. This balance can typically be found on recent mortgage statements or by contacting the mortgage servicer directly. An estimate of the home’s current value is also necessary, especially if relying on appreciation to meet LTV requirements.

If the request for PMI removal is based on an increased home value, a professional home appraisal is typically required. The mortgage servicer will usually need to order this appraisal, often at the homeowner’s expense, with costs generally ranging from $300 to $750. This ensures an unbiased estimate of the property’s market value. Homeowners should avoid ordering their own appraisal independently, as lenders often require an appraiser from their approved list.

Documentation of a consistent payment history is also a common requirement. This includes evidence that the loan is current and that there have been no 30-day late payments in the past 12 months or 60-day late payments in the past 24 months. Mortgage statements or a payment history report from the servicer can serve as proof. Identify the correct contact information for the mortgage servicer, including a specific department for PMI inquiries. Some servicers may have a specific form for PMI removal requests, while others may accept a written letter, so it is helpful to clarify this beforehand.

Submitting Your Request

After gathering all necessary information and documentation, formally submit the Private Mortgage Insurance (PMI) removal request to the mortgage servicer. Homeowners should initiate contact with their servicer, typically through a phone call to their customer service department or by reviewing their website for specific instructions. Many servicers require a written request for PMI cancellation, which can be a formal letter or a specific form provided by the servicer. This written request should clearly state the desire to cancel PMI and include the loan number, the homeowner’s contact information, and the basis for the removal request, such as reaching the required loan-to-value (LTV) ratio or an increase in property value.

If the servicer provides a specific form, accurately complete it using the prepared information, including details from any recent appraisal. Any supporting documentation, such as the appraisal report confirming increased home value or records demonstrating a good payment history, must be submitted along with the request. Send sensitive documents securely, often via certified mail with a return receipt requested, or through a secure online portal if the servicer offers this option. Maintaining copies of all submitted documents and correspondence, including confirmation numbers or mailing receipts, is a sound practice for personal records.

After Your Request is Submitted

Once a Private Mortgage Insurance (PMI) removal request has been submitted, homeowners can anticipate a review period by the mortgage servicer. The typical timeline for a servicer to process and respond to a PMI removal request can vary, but generally, homeowners might expect a decision within a few weeks to a month. The servicer will communicate their decision, usually through a written notice detailing the outcome. If the request is approved, PMI payments will cease, and the monthly mortgage payment will be adjusted accordingly, reflecting the removal of this additional charge. The exact date PMI payments stop will be specified in the approval notice.

If the PMI removal request is denied, the servicer is obligated to provide a reason for the denial. Common reasons for denial include not meeting the required loan-to-value (LTV) ratio, an insufficient payment history, or the presence of junior liens on the property. For instance, a denial might occur if there have been late payments within the past 12 to 24 months, or if the appraised value does not sufficiently lower the LTV. Should a request be denied, homeowners can take several next steps, such as addressing the specific reasons for denial, making additional principal payments to build more equity, or waiting for further home appreciation before reapplying.

Homeowners should receive annual disclosures from their servicer that outline their PMI cancellation and termination rights, helping them track their progress towards automatic removal.