What is private mortgage insurance (PMI)?
PMI protects the lender when a homeowner defaults on a mortgage loan. It also lowers the lender’s risk when funding a loan. In most cases, if you've paid less than 20% down on your home, you're required to have PMI.
💡 Tip: To quickly determine whether you’re eligible to request PMI cancelation, visit the Escrow page of your online account and use our PMI Cancelation Self-Serve tool! (*Currently, the tool only supports loans owned by Fannie Mae, but Freddie Mac support is coming soon!)
PMI can typically be canceled based on Original Value or on Current Value—what’s the difference?
Cancelation based on Original Value compares your loan’s current Unpaid Principal Balance (UPB) with your property’s Original Value. Original Value is defined as the lesser of your property's valuation when your loan closed or your purchase price. In the case of a refinance, your property's Original Value will be its appraised value during the refinance or, if an appraisal did not take place, the value the lender provided at closing.
Cancelation based on Current Value compares your loan’s current UPB with your property’s expected price if sold in the near future. Unlike cancelation based on Original Value, cancelation based on Current Value takes into account any rise in your property’s value based on market conditions or on substantial improvements you’ve made to your property.
Both cancelation methods might require a new property valuation.
When can I cancel my PMI based on Original Value?
You can request to cancel PMI when your loan’s current UPB reaches 80% of your home’s Original Value. You may reach this 80% mark by making your scheduled payments or making extra payments ahead of schedule. You must also meet all the following criteria to cancel PMI successfully:
- Your request is made verbally or in writing (using our PMI Cancelation Self-Serve tool qualifies)
- Your loan is current when you request cancelation
- You have a good payment history*
- Your property has not depreciated in value
- There are no junior liens (such as a second mortgage) on your home
* A good payment history means you have not made any payments that were 30 or more days past due in the last year or 60 or more days past due in the last two years. If you made delinquent payments while on a disaster-related mortgage assistance plan, or if your home is located in a disaster area, you might still be able to cancel PMI.
Can I cancel my PMI based on Current Value?
Whether you can cancel PMI based on Current Value, and the criteria to do so, will depend on who owns your loan. Most commonly, you may request cancelation based on Current Value if:
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Your loan is less than two years old but you have made substantial improvements to your property and your current UPB is 80% or less of your property’s Current Value
- This means that if your property has increased in value but your loan is not two years old and you have not made substantial improvements, we can't take your property's Current Value into account when considering a PMI cancelation request
- Your loan is 2-5 years old and your current UPB is 75% or less of your property’s Current Value
- Your loan is more than 5 years old and your current UPB is 80% or less of your property’s Current Value
Generally, all the following criteria must also be met:
- Your request is made verbally or in writing
- Your loan is current when you request cancelation
- You have a good payment history (as defined above)
💡 Tip: For purposes of determining how old your loan is, a refinance restarts the clock.
Does PMI cancel automatically?
Yes, we will cancel your PMI automatically either:
- On the date your UPB is first scheduled to reach 78% of your property’s Original Value, or
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If your loan does not reach this 78% mark, at the start of the month after you reach the midpoint of your loan’s amortization schedule—in other words, halfway through the full term of your loan
- For example, 30-year loans reach their midpoint once 15 years have passed
You must be current on your payments on the scheduled cancelation date in both instances. Otherwise, your PMI will terminate once your payments are current.
💡 Tip: If you make extra payments and reach 78% ahead of schedule, you must reach out to us and request cancelation; otherwise, your mortgage insurance will cancel automatically when scheduled
What if I own a 2-4 unit residence or an investment property?
The Original and Current Value criteria above typically apply to these property types, except the required LTV ratios are lower—often 65% or 70% in both cases. In addition, automatic cancelation either does not apply or, for some loans, applies only at the midpoint.
How can I inquire about or request PMI cancelation?
Don't hesitate to email us at mortgage-insurance@valon.com.
💡 Tip: If you’ve registered for an online account and your loan is owned by Fannie Mae, you can immediately check your eligibility and (if applicable) request cancelation by visiting the Escrow page of your account and using our PMI Cancelation Self-Serve tool.