When Can I Cancel Private Mortgage Insurance?
Question: Can I get a straight answer to a question? I want to cancel my private mortgage insurance (MI). I bought a home for $280,000 and borrowed $250,000. The property is now worth no less than $350,000. I have at least 20 percent equity and yet the lender will not allow me to cancel my insurance policy. Is this right?
Answer: This is a frequent question, perhaps the most frequent one raised by consumers. Many people have “heard” that you can cancel MI once you have 20 percent equity. This information is simply wrong.
Federal rules require lenders in most cases to cancel MI once the loan balance has been reduced to 78 percent of the original amount and you have a good payment history. In your case, 78 percent of $250,000 equals $187,500. The fact that your home is now worth $350,000 is not the issue addressed under the federal rules.
You can ask a lender to end MI coverage once the loan balance has been reduced to 80 percent of the original loan amount. Many will comply if you have a good payment history over several years, but they are not required to do so under federal rules.
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Syndicated originally by Content That Works and posted with permission.
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