Did you have to obtain a mortgage loan with private mortgage insurance (PMI), because you couldn’t make a down payment of 20% or more on your home?

If so, and you’re up to date on your monthly mortgage payments, and your mortgage closed on or after July 29, 1999, you can stop paying PMI on your mortgage loan. Here are two ways you can have it removed from your mortgage:

1. Request PMI cancellation

According to the Homeowners Protection Act, once you’ve reached the date that the principal balance on your mortgage falls to 80% of your home’s original value, you can ask your lender to cancel PMI. You’ll find this date on the PMI disclosure form you received when you took out your mortgage. If you can’t find this form, contact your lender. You can request PMI cancellation earlier than this date, if you’ve made additional payments to your principal balance and your balance is now 80% of your home’s original value.

Additional criteria you’ll need to meet before your lender will cancel your PMI, includes:

• The cancellation request must be in writing
• You must have a good payment history and be current on your payments
• You cannot have any liens on your home.
• The value of your property can’t be below what it was when you first bought it. Your lender likely will require a property appraisal to prove the current value.

2. Automatic PMI termination

On the date when your principal balance reaches 78% of the home’s original value, your lender must terminate your PMI automatically. However, you must be current on your mortgage payments on this date for this termination to take place; otherwise you’ll need to continue PMI until your payments are up to date.

Additionally, your lender must terminate your PMI if you reach the midpoint (or half-way point) of your loan’s amortization schedule (for example, 15 or 30 years) before the date your principal balance reaches 78% of the home’s original value. For example, the midpoint on a 30-year loan is after 15 years have passed. PMI termination at your loan’s midpoint can occur before you reach 78% of the your home’s original value if you have a mortgage with an interest-only period, principal forbearance or a balloon payment. However, you still must be current on your monthly mortgage payments for this termination to occur.

If you have a Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) loan, these rules generally don’t apply. Contact your servicer for information about mortgage insurance on FHA or VA loans. Also, different rules apply if you have lender-paid mortgage insurance.

Cancellation or termination of your private mortgage insurance can save you money. Contact Grandview Lending to learn more about purchasing a home with private mortgage insurance.

Photo credit: iStockphoto