Under the Homeowners Protection Act (HPA), in most cases,
lenders must “automatically” cancel mortgage insurance on conventional loans –
with certain exceptions – when:
- You reach 22% equity in your home based on the original property value and amortization schedule.
- Your mortgage payments are current.
Prior to the point of automatic cancellation, you may also ask your lender to cancel your PMI if you have at least 20% equity based on your home’s original value, because:
- You’ve made all of your scheduled payments, or
- You’ve made extra payments to reduce the principal balance ahead of schedule.
In this “accelerated” instance, your request must be in
writing, your property value must be at least the same as its original value,
and you cannot have subordinate liens on your property.
You can also ask your lender to cancel mortgage insurance if
the equity in your home has increased due to its appreciating value. In
addition to a good payment history, these guidelines typically apply:
- If your mortgage is at least 2 years old but less than 5, you generally need at least 25% equity in your home.
- If your mortgage is more than 5 years old, you typically need at least 20% equity.
- Your lender will typically require an appraisal to verify your home’s value.
This last scenario is not covered under the HPA and lender/investor requirements may vary.