How to Cancel PMI Under the Homeowners Protection Act

If you put less than 20 percent down when you bought your home, you are probably paying private mortgage insurance. It is the extra charge on your monthly statement that does nothing for you. It protects the lender, not you. The good news is that federal law gives you the right to cancel it once you meet certain conditions.

The Homeowners Protection Act of 1998 is the law that governs PMI cancellation. It applies to conventional loans originated on or after July 29, 1999. If your loan is FHA, VA, or USDA, different rules apply.

There are three ways PMI ends under the law.

The first is borrower requested cancellation. You can ask your servicer to cancel PMI once your loan balance drops to 80 percent of your home's original value. You need a good payment history, no subordinate liens, and your home value must not have declined.

The second is automatic termination. Your servicer must automatically cancel PMI once your loan balance is scheduled to reach 78 percent of the original value, provided you are current on payments. You do not have to ask. They are supposed to do it.

The third is final termination. PMI must end at the midpoint of your loan's amortization schedule regardless of your balance, as long as you are current. On a 30 year loan, that is 15 years.

Most homeowners never hear about any of this. Servicers do not send reminders. They collect the premium quietly until you act or until automatic termination kicks in.

To request cancellation, you send a written request to your servicer. Some servicers have a form. Some require you to send a letter. Some require an appraisal. Some accept a broker price opinion. The process varies more than it should.

If you are still paying PMI and your loan balance is near 80 percent of your home's value, check whether you qualify.