Home Mortgage Calculator with Taxes - Determining When to Cancel Private Mortgage Insurance


Private Mortgage Insurance (PMI) protects lenders in the event that a borrower defaults on their mortgage payments before the loan has been paid off. If you buy a home then you may be required to purchase this insurance. However, you don't have to pay it for the remainder of the loan. Read on to learn when you're eligible to cancel your PMI and how to do it.


The Federal Homeowners Protection Act – What It Does and Doesn't Say

The Federal Homeowners Protection Act has a lot to say about PMI. First, it says that you can ask for your PMI to be canceled once you've paid down 20% of the mortgage. Keep in mind that this is 20% of the amount you borrowed from the lender (also known as principal) and does not include interest. You can request information from you lender at any time that will tell you exactly how much principal is left on your loan.


The other important thing to note about the Federal Homeowners Protection Act is that it actually requires lenders to cancel PMI automatically – but not until you've paid down 78% of the principal on your mortgage. As you can see, this is a huge gap that could mean paying PMI unnecessarily for more than a decade.

What to Do to Get Your PMI Canceled

You'll need to contact your lender and request your PMI to be canceled. Some lenders have a way to do this online while others require you to fill out a form and send it in to them. Keep in mind that this process can take some time. Be patient and know that once the cancellation is complete you will no longer have to pay for this insurance.

Be Proactive and Stay on Top of Your PMI

One of the reasons that people frequently don't think to cancel their Private Mortgage Insurance is because the payments are almost always rolled into their monthly mortgage payments. As a result, they simply don't realize that it can be canceled or they forget to keep on top of it. In order to avoid paying these fees unnecessarily, make note of when you expect to have paid down 15% of your mortgage.  Utilizing a home mortgage calculator with taxes can help you with producing amortization tables.


Once you reach that date, contact your lender to get the specifics. When you get within a few months of reaching the 20% goal, start inquiring about the process of canceling your insurance. If there is paperwork to be filled out, request it in advance so that when you do reach 20% you're ready to go.


Private Mortgage Insurance is a necessary cost when you initially take out a mortgage but you don't want to pay any longer than necessary. The above tips will help ensure that you cancel as soon as possible.

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