Removing PMI: the three ways it ends and how to ask

Way one: ask at 80% of original value

The CFPB says you have the right to ask your servicer to cancel PMI on the date your principal balance is scheduled to fall to 80% of the home's original value. The first date you can ask should appear on the PMI disclosure you received at closing. You can ask sooner if extra payments bring the balance down to 80% early.

"Original value" generally means the lower of the contract price and the appraised value when you bought. If you refinanced, it is the appraised value at the refinance.

The servicer must grant your request if you meet four conditions the CFPB lists:

1. You make the request in writing.
2. You have a good payment history and are current.
3. You can certify there are no junior liens, such as a second mortgage, on the home.
4. If asked, you can show the property's value has not dropped below the original value, for example with an appraisal.

For loans Fannie Mae owns, its Servicing Guide defines a good payment record as: current when you ask, no payment 30 or more days late in the last 12 months, and no payment 60 or more days late in the last 24 months.

Way two: automatic termination at 78%

Even if you never ask, the CFPB says your servicer generally must end PMI on the date your balance is scheduled to reach 78% of the original value, as long as you are current. If you are not current on that date, it ends once you catch up.

There is also a backstop. If the 78% date has not arrived by the midpoint of your loan term, PMI must end on the first day of the following month, as long as you are current. On a 30-year loan, that is just after year 15.

Way three: ask based on today's value

Values can rise faster than you pay down the loan. Federal law does not require servicers to cancel PMI based on a new value, but Fannie Mae allows it for loans it owns, as long as you make the request. Its Servicing Guide sets these limits for a one-unit principal residence or second home:

The value must come from a valuation that inspects both the inside and outside of the home, ordered through Fannie Mae's system, and the same payment record rules apply. Improvements that count are renovations that substantially improve marketability and extend the home's useful life, such as kitchen or bathroom remodels or added square footage. Ordinary repairs do not count.

Freddie Mac and other investors have their own rules, so ask your servicer who owns your loan and what it requires. You may have to pay for the valuation, so ask about the cost first.

Speeding things up with extra payments

Because the 80% request date can come early if you prepay, extra principal shortens the wait. The CFPB's guide to paying down a mortgage explains that the part of each payment going to principal builds equity, and extra principal does the same. If your loan has no prepayment penalty, a modest extra amount each month can bring the request date forward by years. Make sure your servicer applies the extra to principal.

Writing the request

Keep it simple and in writing:

• Your name, address and loan number.
• A clear statement that you are requesting cancellation of private mortgage insurance.
• The basis: scheduled 80% date, prepayment to 80%, or current value.
• A statement that there are no other liens on the property.
• A request that the servicer tell you in writing of any valuation needed and its cost.

Send it in a way you can track and keep a copy. If the request is denied on a Fannie Mae loan, the servicer must tell you why, including the valuation result, within 30 days.

After PMI ends, check that your next statement and escrow analysis no longer include the premium.

The bottom line

You can ask to cancel PMI at 80% of the original value, it must end automatically at 78% if you are current, and many loans allow an early request based on a higher current value. Find your dates on the PMI disclosure or with the calculator, keep your payment record clean, and send a written request as soon as you qualify.