Home Buying in Long Beach>Question Details

Stevet445, Home Buyer in Belmont Shore, Long...

does pmi expire once 20% of principle is paid?

Asked by Stevet445, Belmont Shore, Long Beach, CA Thu Jul 21, 2011

Help the community by answering this question:


On conventional mortgages it'll expire when the below events happen, however some lenders (at their discretion) may permit you to get an appraisal and base PMI cancellation upon the value:

Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

Automatic Termination
Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.

For high risk loans, mortgage lenders or servicers are required to automatically cancel PMI coverage once the mortgage is paid down to 77 percent of the original value of the property, provided you are current on your loan.

Final Termination
Under HPA, if PMI has not been canceled or otherwise terminated, coverage must be removed when the loan reaches the midpoint of the amortization period. On a 30-year loan with 360 monthly payments, for example, the chronological midpoint would occur after 180 payments. This provision also requires that the borrower must be current on the payments required by the terms of the mortgage. Final termination must occur within 30 days of this date.

You can find that info at: http://www.frbsf.org/publications/consumer/pmi.html

If it's an FHA loan it's a little more involved, and there is also no option for you to get a current appraised value in order to prove you have sufficient equity - it is all based on the value figure when you obtained the mortgage:

For mortgages with terms more than 15 years the annual mortgage insurance premium is cancelled when the LTV ratio reaches 78% the lesser of the sales price, or appraised value at origination (new appraised values will not be considered), provided the borrower has paid the annual MIP for at least five years.

For mortgages with terms 15 years and less, the annual mortgage insurance premium is cancelled when the LTV ratio reaches 78% (same definition as above), regardless of the length of time the borrower has paid the annual mortgage insurance premium.

You can find that info at: http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?addr… *

* this has some correct information, but the part about LTV's of 89.99% & below and 15-year term or less is incorrect per Mortgagee letter 11-10 at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi… - and I have no clue why FHA doesn't correct the incorrect part of it, even that mortgagee letter isn't 100% accurate, as on 4/15/2011 HUD sent out an email which says:

"The Upcoming Annual Mortgage Insurance Premiums (MIP) Changes and Mortgages with Terms of 15 Years or Less

This message is to inform lenders that HUD’s Single Family Premium Collection System (SFPCS) will not bill for Annual MIP on a mortgage with:

· a term of 15 years or less, AND
· a loan-to-value ratio (LTV) at or below 78 percent at the time of origination.

For example, if a lender closes a mortgage with a 15 year term at 78 percent LTV, SFPCS will not bill for the Annual MIP for that mortgage."
0 votes Thank Flag Link Thu Jul 21, 2011
Steve, typically the answer is no. You will most likely have to petition your lender to remove the PMI and they will need to establish that you have more than 20% equity in the property. This isn't based on the original loan balance -- it's based on the current value of the property. The specific method and policy may depend on your lender so I would suggest contacting them directly.
0 votes Thank Flag Link Thu Jul 21, 2011
In my experience the answer would be no. There are different requirements depending on the type of financing you took out. Also, if you are doing improvements to the home, it is important to take before and after pictures and attach the receipts. This will help your cause when if your lender requires you to have a new appraisal and I have not heard of one that hasn't. And finally, remember that the appraisal is based on the sold comps in your area. That will be a big factor in where you are at along with your down payment etc.
0 votes Thank Flag Link Thu Jul 21, 2011
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer