How to Remove PMI in California

What PMI Is, and Why It Can End

Private mortgage insurance, or PMI, is insurance a lender requires on many conventional loans made with a smaller down payment. You pay for it, but it protects the lender, not you.

Because it protects the lender’s risk, and that risk falls as the balance comes down, federal law limits how long it can last. The Homeowners Protection Act of 1998 covers private mortgage insurance on a one-unit home that is your principal residence, on loans closed on or after July 29, 1999. It does not cover FHA, VA or USDA loans. Loans a lender classified as high-risk at closing are treated differently, so ask your servicer which rules apply to yours.

Asking Your Servicer to Cancel PMI

The first route is a request. You may ask your servicer to cancel PMI once the principal balance reaches 80% of the original value, either because the original amortization schedule says it has or because extra payments got it there sooner. The original value is generally the lower of the purchase price and the appraised value when the loan closed; on a refinance of your home, it is the appraised value the lender relied on.

The statute sets the conditions. You must ask the servicer in writing, have a good payment history, and be current on your payments. You must also meet any requirement your loan’s holder sets for evidence that the home’s value has not fallen below the original value, and for a certification that your equity is not encumbered by a second lien.

The servicer decides what it accepts, and it may require an appraisal or a broker price opinion, which you may have to pay for. A recent late payment or a HELOC behind the first mortgage can also stop a request, so check both before you write.

When PMI Ends on Its Own

The second route needs no request. The servicer must end PMI on the date the balance is first scheduled to reach 78% of the original value, if you are current on your payments that day. If you are behind, it ends on the first day of the first month after you catch up. This date comes from the original schedule, not from extra payments or a higher home value.

The third route is a backstop. If PMI has not ended sooner, the servicer may not keep charging it past the first day of the month after the midpoint of the amortization period (halfway through the schedule), as long as you are current. That rule applies even to loans treated as high-risk.

Using Your Home’s Current Value

The federal routes above measure against the original value. If your home has gained value since you bought it, some investors allow a request based on current value.

Fannie Mae’s Servicing Guide allows it on a borrower-initiated request when the loan-to-value ratio, measured against a new valuation, is 75% or less and the loan is between two and five years old, for loans owned by Fannie Mae; other investors and servicers differ. Once the loan is more than five years old, the ratio must be 80% or less, for loans owned by Fannie Mae; other investors and servicers differ. If improvements you made raised the home’s value, the minimum seasoning of two years can be waived when the ratio is 80% or less, for loans owned by Fannie Mae; other investors and servicers differ. The payment record must be current, no payment 30 or more days late in 12 months, none 60 or more days late in 24 months, and the value must come from a property valuation based on an interior and exterior inspection, for loans owned by Fannie Mae; other investors and servicers differ. The servicer may not solicit the request, the servicer decides, and the valuation may be at your cost.

Ask your servicer which investor owns your loan and what it requires, in writing, before you order anything.

FHA Loans: Mortgage Insurance Works Differently

An FHA loan carries a mortgage insurance premium, or MIP, not PMI, and the Homeowners Protection Act does not apply to it. FHA annual mortgage insurance has no borrower-requested cancellation. It ends under the duration rule (life of the loan under 10% down; 11 years at 10% or more, for case numbers on or after June 3, 2013) or when the loan is refinanced out of FHA. When the scheduled period ends, your servicer stops charging it.

Older FHA loans had different rules; if your case number was assigned before that date, ask your servicer which apply. Refinancing out of FHA is the route to compare, with the tradeoffs below.

Refinancing to Drop Mortgage Insurance: The Tradeoffs

A refinance is not a request to your servicer; it replaces the loan. If your current rate is lower than today’s, a new loan can cost more each month than the insurance it removes.

There are closing costs, a new appraisal and a new term, and a new conventional loan may carry PMI of its own if the appraisal does not show enough equity. A new loan means qualifying again. Compare what the refinance costs against how long the insurance would otherwise last.

Before You Call Your Servicer

• Find your original purchase price or the appraised value from closing, and your current principal balance.
• Check your payment history for the past two years and make sure you are current.
• Ask the servicer for its cancellation requirements in writing.
• If you have an FHA loan, find the date your FHA case number was assigned.

Which Route Fits Which Borrower

The servicer decides on any request in either column.

Request, wait, or refinance: compare the three before you decide. No credit pull to talk through general options.

PMI Removal FAQ