One federal law governs almost everything about canceling PMIInsurance that protects the lender, paid by you, often until you have about 20% equity.Click to open the full glossary.: what you can ask for. What must happen on its own. And what your lender may ask of you first.
What the law is and why it exists
Before 1999, it was up to your lender. Many kept taking PMI long after you owned enough of the home to drop it. So Congress passed the Homeowners Protection ActThe federal law that sets the rules for ending PMI.Click to open the full glossary. of 1998 to set clear rules with teeth. They say when PMI must end. They cover conventional loans on a home you live in, closed on or after July 29, 1999.
The three rights the HPA gives you
- Borrower-requested cancellation at 80% LTVWhat you owe as a percentage of what the home is worth.Click to open the full glossary.. Once what you owe falls to 80% of what the home was worth at the start, you can ask in writing. You must be current, with a good payment record. Your servicer may also want proof the value has not dropped, and that there is no second loan on the home.
- Automatic termination at 78% LTV. Your servicer must stop PMI on its own on the date your first payoff plan reaches 78%. That is based on what the home was worth at the start, not on what you owe today. You must be current on your payments. They must do it even if you never ask.
- Final termination at the midpoint of your loan term. Say your loan has not reached 78% on its own. PMI must still end at the halfway mark of your term. On a 30 year loan that is year 15. It ends whatever you owe, as long as you are up to date.
The 78% automatic-termination date is fixed to your loan's original payoff plan and its first value. That catches people out. Paying more each month can pull your 80% date in. It cannot move the 78% date. That one is set the day you close.
What the law does not guarantee
The HPA covers conventional loans only. It does not cover an FHA loanA government-backed loan with a low down payment.Click to open the full glossary.. Those charge MIPThe FHA version of PMI, which often lasts the whole loan.Click to open the full glossary. instead. HUD sets those rules, and the charge often lasts the whole loan no matter how much of the home you own. The law also lets your servicerThe company you actually send your payment to.Click to open the full glossary. ask for proof that your home has not lost value. That can mean an appraisalA professional opinion of what your home is worth.Click to open the full glossary., at about $400 to $600. And the law gives you no right to count a rise in value. Some servicers will, under their own rules.
"The 78% automatic date is locked in at closing. Extra payments can't move it, but they also can't make your lender skip it."
What happens if your servicer doesn't comply
This law has teeth. A servicer that breaks it can be sued. You can also file a complaint with the CFPB. Many hold-ups are just paperwork, not spite. Send a letter with your loan number and your figures. Then call two or three weeks later.
Enter your loan numbers in our free PMI drop-date calculator to estimate both your 80% and 78% dates in seconds, and read our PMI removal letter template when you're ready to request cancellation.
Knowing your rights is one thing. Knowing the month you can use them is another. Your free dashboard estimates both dates from the numbers you enter. With Pro, our daily check emails you as you get close.
Know when you can ask to cancel PMI
Your free CasaCrow dashboard estimates the month you reach 80%. With Pro, our daily check emails you as you get close.
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