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  • Writer's pictureKC Stark

When Can a Borrower Cancel Primary Mortgage Insurance (PMI?)

Private mortgage insurance (PMI) is a type of insurance that lenders require from home buyers who make a down payment of less than 20% of the home's purchase price. PMI is intended to protect the lender in the event that the borrower defaults on the mortgage.


When Can a Borrower Cancel Primary Mortgage Insurance (PMI?)

Borrowers can generally cancel PMI when they reach a certain point in the repayment of their mortgage, known as the "cancellation point."


The specific terms for cancelling PMI can vary, but in general, borrowers can cancel PMI once they have reached a loan-to-value ratio (LTV) of 78% or less, based on the original value of the home. The LTV is the ratio of the loan amount to the value of the home.


To cancel PMI, the borrower must contact their lender and request that the PMI be cancelled. The lender will typically require the borrower to provide proof that the LTV has reached 78% or less, such as a new appraisal of the home. If the LTV is below 78%, the lender will cancel the PMI.


It's important to note that the terms for cancelling PMI can vary based on the specific terms of the mortgage, so it's a good idea for borrowers to review their mortgage documents or contact their lender to find out the specific terms for cancelling PMI on their mortgage.


Private mortgage insurance (PMI) is insurance that protects the lender in the event that a borrower defaults on a home loan.


It is typically required for home loans where the borrower puts down less than 20% as a down payment. PMI is typically required for conventional loans, but it can also be required for some government-backed loans such as FHA loans, called a mortgage insurance premium (MIP.)


To determine if a home loan has PMI, you can ask the lender or refer to the loan terms and conditions. The lender is required to disclose the terms of the PMI, including the cost and how long it will be required. Some lenders may offer options to avoid PMI, such as taking out a loan with a higher down payment or obtaining a second mortgage or home equity loan to reach the required down payment amount.


There are two main types of mortgage insurance: private mortgage insurance (PMI) and mortgage insurance premiums (MIP).


  • PMI is a type of insurance that is typically required for conventional loans, which are not backed by a government agency.

  • MIP is a type of insurance that is required for FHA loans, which are government-backed loans that are available to homebuyers with lower credit scores or less money for a down payment.


Both PMI and MIP are typically paid as an upfront premium at closing, as well as an ongoing premium that is paid as part of the borrower's monthly mortgage payment. The upfront premium is usually a percentage of the loan amount, while the ongoing premium is typically a small fraction of the loan amount. The premiums are used to cover the cost of insuring the loan, as well as to build up a reserve fund to cover losses in the event of default.


Have questions about home loans and insurance premiums? Let's talk.


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