What is PMI or Private Mortgage Insurance? If you are looking to buy a new home and unable to make a down payment of 20% of the home value, the lender will add PMI to your mortgage payment. PMI protects the lender in case you default on the loan. Under Homeowner's Protection Act of 1998, lenders are required to cancel PMI when your principal amount reaches 77% (for high risk loans) or 78% (all other loans) of the original purchase price. You have the right to cancel PMI when the principal amount reaches 80% of original purchase price, but certain restrictions apply such as you have never been late on payments or the value of your home has not fallen or there is no 2nd mortgage on the home.
Please note that loans obtained before July 29, 1999 are not protected by this act, but some lenders follow this law whether the loan is obtained before or after this act. In either case, if you want to cancel PMI early, send a request immediately when the principal amount reaches 80% of the original purchase price. Just remember that restrictions apply if you want to cancel at 80%.
