You have the right to remove PMI for many mortgages, once you have paid down your mortgage to a specified point. Ending PMI reduces your monthly costs.
Some lenders and servicers may allow removal of PMI under their own standards. The information below describes the legal requirements that apply to mortgages for single-family principal residences that closed on or after July 29, 1999.
Mortgages through the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) have different requirements. For answers to questions about mortgage insurance on an FHA or VA loan, contact your servicer. If your lender is paying for your mortgage insurance, different rules apply.
Can a Bank Refuse to Remove PMI? What You Need to Know
If you’re like most homeowners, you probably had to pay for private mortgage insurance (PMI) when you bought your home with less than a 20% down payment. The good news is that you don’t have to keep paying PMI forever Once you reach 20% equity in your home, you have the right to request PMI cancellation under the Homeowners Protection Act.
But what if your lender refuses to remove PMI even after you reach that crucial 20% threshold? Unfortunately, lenders can and sometimes do reject PMI cancellation requests. Here’s what you need to know if this happens to you.
When Can a Lender Refuse to Cancel PMI?
There are a few scenarios where a lender may deny your request to remove PMI:
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You haven’t reached 20% equity based on your home’s original value. Lenders can require you to hit 80% loan-to-value ratio based on the lower of your home’s sales price or appraised value at purchase.
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You don’t have a solid payment history. Most lenders require you to be current on your mortgage with no late payments within a certain timeframe.
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There are other liens on your home. If you have a second mortgage or home equity line of credit, for example, your lender may not allow PMI removal.
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Your home value has decreased. If your home is now worth less than its original purchase price, you likely don’t have 20% equity yet.
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You don’t meet other lender requirements. Check your loan documents for any additional criteria your lender has for cancelling PMI.
What Can You Do if Your Lender Refuses?
If you believe you’ve met all the requirements but your lender still won’t remove PMI, don’t give up. Here are some steps you can take:
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Review your loan documents and double check you’ve met all criteria. Make sure you have solid evidence like a payment history printout.
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Submit an updated home appraisal showing you have at least 20% equity based on current value.
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Send a formal written request via certified mail explaining why you’ve met requirements. Follow up persistently if needed.
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File a complaint with the Consumer Financial Protection Bureau or your state attorney general’s office if your lender ignores your requests.
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Consult a real estate attorney. An attorney can review your case and help determine if you have grounds to sue your lender for violating the Homeowners Protection Act. Lawsuits have awarded homeowners damages plus PMI removal.
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Refinance your mortgage. This lets you obtain a new loan without PMI. Just be sure refinancing makes overall financial sense.
Stay Persistent and Know Your Rights
Removing PMI can potentially save you hundreds of dollars per year. Don’t let your lender off the hook if you’ve rightfully met the equity and payment history requirements. Be polite but firm and keep meticulous records anytime you communicate with your lender. Seek help from regulators or legal counsel if needed.
With persistence and a determination to fight for your rights, many homeowners have succeeded in forcing reluctant lenders to finally cancel PMI. So don’t take no for an answer—you could put that PMI savings back in your own pocket where it belongs!
Is my PMI automatically canceled once my principal balance is 78 percent of the home’s original value?
Yes. Even if you don’t ask your servicer to cancel PMI, in general, your servicer must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.
Can I request cancellation of my PMI when my principal balance is 80 percent of the home’s original value?
Yes. You have the right to ask your servicer to cancel PMI on the date the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. The first date you can make the request should appear on your PMI disclosure form, which you received along with your mortgage. If you cant find the disclosure form, contact your servicer.
You can ask to cancel PMI ahead of the scheduled date, if you have made additional payments that reduce the principal balance of your mortgage to 80 percent of the original value of your home.
For this purpose, “original value” generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower. But, if you have refinanced, the “original value” is the appraised value at the time you refinanced.
Your servicer is legally required to grant your request to cancel your PMI as long as you meet the criteria below:
- You make your request in writing
- You have a good payment history and are current on your payments
- You can certify that there are no junior liens (such as a second mortgage) on your home
- You can provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home—if it has, you may not be able to cancel PMI on schedule
A Secret The Bank Won’t Tell You About PMI!
FAQ
What if a bank refuses to remove PMI?
If Your Lender Refuses to Cancel the PMI
If your lender refuses or is slow to act on your PMI cancellation request, politely but firmly request action. Contact the lender by letter or email.
Can I ask my lender to remove PMI?
PMI can be removed under either of two conditions. If principle is paid down to less than 80% (some states 78%) of original amount, you can request PMI be removed. If the house is re-appraised and is high enough in value, you can request PMI removal.
Why is it so hard to get PMI removed?
Many lenders (like Fannie Mae) also require a two-year “seasoning requirement,” meaning you can’t have PMI removed until you’ve made two years’ worth of on-time payments—even if your equity has grown above 20%. If it’s been less than five years, you might even be required to have 25% worth of equity.
What is the 2 year rule for PMI?
For loans that are between two and five years old, the PMI can be removed using the home’s current market value when the loan-to-value (LTV) is 75% or less. There is an exception to this 75% LTV guideline. Mortgage insurance may be removed when substantial improvements have been made and the loan is 2 to 5 years old.