Can I cancel private mortgage insurance (MI)?
August 28th, 2008 By Peter G. Miller
In the usual case, buyers who purchase with 20 percent down or more do not need private mortgage insurance (MI). For those who have MI, there are monthly premiums as long as the insurance is in place.
Under the Homeowners Protection Act of 1998 (HPA), when a loan balance is paid down 22 percent from the original amount lenders must cancel MI. However, there are several caveats.
- The rule does not apply to so-called “high risk” mortgages. With such loans MI can be required for 15 years — more time than most loans are outstanding.
- The federal legislation applies only to loans made after July 29, 1999.
- Many lenders will allow you to cancel MI when you have 20 percent equity in a home. Such lender policies can save years of MI payments.
A calculator created by the Mortgage Insurance Companies of America, MICA, can help you determine when MI can be canceled. To use the calculator, press here.
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