The Act says that you can ask that your PMI be canceled when you’ve paid down your mortgage to 80% of the loan, if you have a good record of payment and compliance with the terms of your mortgage, you make a written request, and you show that the value of the property hasn’t gone down, nor have you encumbered it with liens (such as a second mortgage).
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You can also cancel the annual MIP by paying off the loan, which is usually what happens in a refinancing scenario. Grated, all of this could change in the future. HUD makes changes to FHA policy from time to time, as they did in 2013 when they revised the MIP cancellation policy.
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Most banks will automatically remove PMI when the loan balance has reached 78-80% of the value of the original purchase price. In other words, if someone buys a house for $100,000 and puts $10,000 down (giving you a $90,000 mortgage), once the mortgage is paid down to $80,000 the bank will automatically remove PMI.
If your new loan is more than 80% of the home’s appraised value, you will have to pay private mortgage insurance (PMI). PMI is different in that it should be far less costly than the FHA MI you have been paying and-most important-you CAN drop PMI once you can show that the present value of your property gives you an 80% loan to value ratio.
You can simply wait for it to drop off. By law, lenders must cancel conventional pmi when you reach 78% loan-to-value. Many home buyers opt for a conventional loan, because PMI drops, while FHA MIP.
the first day of the month following the date the mid-point of the mortgage loan amortization period is reached, if the scheduled LTV ratio for the mortgage loan does not reach 78% before the mid-point.
You can request that your PMI be dropped earlier than these dates if you meet the following criteria: You must be up-to-date on your monthly payments. Your request must be in writing.
To remove PMI, or private mortgage insurance, you must have at least 20% equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80% of the home’s.
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