You may be able to stop paying private mortgage insurance on a Denver home when your conventional mortgage balance reaches certain loan-to-value thresholds. Federal law provides eligible homeowners with both borrower-requested cancellation and automatic termination rights.
Private mortgage insurance, commonly called PMI, is generally required when a borrower obtains a conventional mortgage with less than 20% equity. Although the homeowner pays the premium, PMI protects the lender if the borrower stops making mortgage payments.
When Can You Request PMI Cancellation?
For many conventional mortgages, homeowners have the right to request PMI cancellation when the principal balance is scheduled to reach 80% of the property’s original value.
The original value is generally the lower of the purchase price or appraised value when the home was purchased. If the mortgage has been refinanced, the original value is ordinarily based on the appraisal completed during that refinance.
You may reach the 80% threshold earlier by making additional principal payments. Contact your mortgage servicer to request the specific balance required for cancellation.
What Are the PMI Cancellation Requirements?
Reaching 80% loan-to-value does not always cause PMI to disappear immediately. The Consumer Financial Protection Bureau explains that a homeowner requesting cancellation may need to:
- Submit the request in writing
- Be current on the mortgage
- Have a satisfactory payment history
- Certify that there are no junior liens
- Provide evidence that the property’s value has not declined
The servicer may require an appraisal or another acceptable valuation. The borrower is commonly responsible for this expense.
Current federal cancellation guidance is available from the Consumer Financial Protection Bureau.
When Does PMI End Automatically?
For many eligible mortgages, the servicer must automatically terminate PMI when the principal balance is scheduled to reach 78% of the home’s original value. This date is determined by the original amortization schedule, even if the home’s market value has not increased.
The homeowner generally must be current on the loan. If payments are delinquent, termination may be postponed until the mortgage becomes current.
Automatic termination differs from borrower-requested cancellation. A borrower may request cancellation at the 80% point, while automatic termination generally occurs later at 78%.
How Do You Start the Process?
Review your closing documents for the PMI disclosure. It may identify the date when your balance is scheduled to reach the cancellation threshold.
Next, contact your mortgage servicer and ask:
- What is my current principal balance?
- What balance is required to cancel PMI?
- Must the request be submitted in writing?
- Is a new appraisal required?
- What payment-history rules apply?
- Are there any additional investor requirements?
Do not stop paying the premium until the servicer confirms that PMI has officially been removed. Understanding your cancellation date could help you stop paying PMI on your Denver home as soon as you become eligible.
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