Tips for Handling PrivateMI Cancellation
Your servicer is the best resource when canceling PrivateMI and is able to help you with specific questions about your loan as well as with any information not covered here. Here are a few other tips to keep in mind as you work through this process:
Prepare: the more you know before you call your servicer, the faster and easier the process will be.
Persevere: when you first check into PrivateMI cancellation, you may not meet all the requirements. Give yourself time to meet the guidelines and apply again.
Plan Realistically: financial transactions take time. Don't expect things to happen instantly
Prioritize: you may not want to pay for an appraisal or other fees now, but you will get that money back, plus more, in savings if your PrivateMI is no longer necessary and can be canceled.
PrivateMI Cancellation Q&As
What is private mortgage insurance?
How do I know if I have PrivateMI on my mortgage loan?
Who do I contact about canceling my PrivateMI?
How do I achieve 20% equity in my home?
How do I determine my LTV ratio?
What are the specific requirements for PrivateMI cancellation?
What do I need to know when I contact my servicer about canceling my PrivateMI?
What happens when I contact my loan servicer about canceling my PrivateMI?
What will be included in the cancellation information from my servicer?
What's the difference among appraisals, BPOs and CMAs?
Do I have to refinance in order to cancel PrivateMI?
Can I use PrivateMI if I'm refinancing?
Can I use the tax value of my home for cancellation?
How do I know if it's worthwhile to get an appraisal or home valuation?
How do I prepare for the appraisal?
What happens after the appraisal?
How will I know if my PrivateMI is going to be canceled?
Do I get a refund when I cancel PrivateMI?
How do I get an escrow analysis?
How do I get a refund of excess premium paid?
What is private mortgage insurance?
Private mortgage insurance (PrivateMI) is insurance that protects a lender or investor against loss if a borrower stops making mortgage payments. It makes it possible for you to buy a house with as little as a 3-to-5 percent down payment, helping you buy a home sooner than you otherwise could.
How do I know if I have PrivateMI on my mortgage loan?
If your loan required PrivateMI, your lender indicated that at application, commitment and closing. It will be in the closing papers on the HUD1 form. You can also check your monthly or annual mortgage statement or invoice for PrivateMI. Or, you can use the telephone number on your payment coupon or invoice to contact your loan servicer and find out if you have PrivateMI.
Can I cancel PrivateMI?
Yes, your servicer can cancel your PrivateMI. There are very few loans that require PrivateMI for the entire loan term. In fact, 90 percent of borrowers cancel their PrivateMI within 60 months. Neither lenders nor mortgage insurers want you to pay for PrivateMI once it is no longer needed, and you can cancel your PrivateMI at no charge.
There are two general sets of circumstances under which your PrivateMI can be canceled. Under a federal law called the Homeowners Protection Act of 1998, servicers are required to automatically terminate PrivateMI coverage on most loans originated after July 29, 1999 when the loan is paid down to 78% LTV (which means you have 22% equity in your home). To find out if your loan might be eligible for cancellation use the online calculator entitled, "How long will it take before I can cancel my PrivateMI?" Cancellation requirements are different for loans originated before the Homeowners Protection Act went into effect and may vary by state. Your servicer can tell you the requirements for canceling PrivateMI on your loan.
You can also request PrivateMI cancellation if you reach 80% LTV (you have 20% equity in your home) and meet the investor's requirements. General information on investor requirements are outlined below.
Certain loans, such as some low down payment loans through Fannie Mae, Freddie Mac and the Veterans Administration, are exempt from cancellation laws. Lender paid MI, a form of mortgage insurance that is paid for by your lender and financed by a slightly higher interest rate on your loan, cannot be canceled during the life of the loan.
Who do I contact about canceling my PrivateMI?
Your loan servicer. Contact information should be listed on your monthly or annual statement or invoice. Because PrivateMI is ordered and canceled by your servicer, your PrivateMI company cannot cancel the policy at your request. If you contact your PrivateMI company, they will refer you to your loan servicer.
What is a servicer?
A loan servicer receives and processes the mortgage loan payment, manages your escrow account and sends the funds to the appropriate parties (for example your property taxes or insurance payments). There are several financial institutions that can be involved in the life of your mortgage loan. For example, your lender may sell the loan to an investor (another lender or one of the federally-sponsored loan purchasers, Fannie Mae or Freddie Mac) who may then contract with a servicer.
How do I achieve 20% equity in my home?
There are several ways you can reach 20% equity in your home. Some examples include making regular payments for a number of years, paying down the principal, making improvements that increase the value of your home or having the property increase in value (appreciation). Your servicer can provide your principal balance, which you can use to determine whether you have reached 20% equity. Your servicer also can arrange for an appraisal of your property by a licensed, approved professional (at a charge to you) to determine if it has appreciated sufficiently for your PrivateMI to be canceled.
You can determine your equity in your home by dividing the current value into the current loan balance. For example, if your mortgage loan has an outstanding balance of $100,000 and your house is worth $125,000, you have 20% equity.
How do I determine my LTV ratio?
Use this simple formula to get an idea of your LTV ratio:
| Loan Amount | = | $100,000 | = | (0.8) 80% LTV |
| Appraised Value | = | $125,000 |
How do I cancel my PrivateMI?
You can cancel PrivateMI without refinancing simply by working with your servicer. The simple answer is to make sure you have enough equity in your home and contact your servicer (the contact information should be on your payment stub or invoice).
What are the specific requirements for PrivateMI cancellation?
Requirements can vary a great deal based on factors like loan servicers, loan types and property types. Your servicer can tell you the specific requirements for your loan. Your servicer will probably require a written request to cancel your PrivateMI. Some servicers may accept verbal requests to cancel PrivateMI.
Here's an idea of typical requirements:
- That you have made PrivateMI payments for a minimum period of time
- That your loan balance is below 75% to 80% based on your payment history, structural improvements or other conditions
- That you have a good payment history
- Payments must be current
- No payments more than 30 days late in the past 12 months
- No more than one late payment penalty in the past 12 months
- That there is no notice of default recorded against the property
What do I need to know when I contact my servicer about canceling my PrivateMI?
You should have as much loan information as possible, including:
- Your name and Social Security number
- Property address
- Loan number
What happens when I contact my loan servicer about canceling my PrivateMI?
Like most businesses, loan servicers typically have automated phone systems and they may even have an option for information on canceling your PrivateMI. If they don't, simply ask the customer service representative what their requirements are for PrivateMI cancellation. Most servicers require a request in writing for PrivateMI cancellation, although a few may accept a verbal request. Either way, ask them to send you information regarding canceling PrivateMI on your loan.
If a written request for PrivateMI cancellation is required, be sure to confirm the mailing address, email address or fax number and the contact person's name for the letter. Sample letters for you to use in contacting your servicer can be accessed by clicking here.
What will be included in the cancellation information from my servicer?
Along with the steps required to cancel your PrivateMI, your servicer will send you information including:
- Your current LTV ratio
- The required LTV to cancel PrivateMI on your loan
- Whether you need an appraisal, a Broker's Price Opinion (BPO) or a Comparative Market Analysis (CMA) and information on contacting the right person at your servicer to arrange for the needed service.
What's the difference among appraisals, BPOs and CMAs?
An appraisal is the most thorough inspection and includes a complete assessment of your home's interior and exterior, as well as your surrounding neighborhood and other factors. A BPO is not as thorough an evaluation as an Appraisal and is conducted by a licensed professional. CMAs are property values established for listing a home for sale based on comparative prices evaluated by a licensed professional. BPOs and CMAs may be conducted as an inside/outside evaluation or as a "drive by," which means the inspector simply drives by your home and evaluates the exterior and neighborhood.
Do I have to refinance in order to cancel PrivateMI?
No. You can request PrivateMI cancellation without refinancing if you meet the investor's requirements. If your loan was originated after July 29, 1999, your PrivateMI will be automatically terminated when your mortgage is paid down to 78% of the original value. To find out if your loan might be eligible for cancellation use the online calculator entitled, "How long will it take before I can cancel my PrivateMI?"
Can I use PrivateMI if I'm refinancing?
Yes. You can choose PrivateMI when you refinance to improve your financial flexibility. By getting a new loan that is over 80% of the present appraised value of your home, you can get cash to pay off consumer debt, make other investments or cover tuition. If you have a piggyback or 80-10-10 mortgage loan, you can refinance with PrivateMI and replace the second mortgage. PrivateMI can be canceled or will automatically cancel but a second mortgage will not.
Can I use the tax value of my home for cancellation?
No. An assessment for tax valuation does not consider the same factors and is not the same as a third-party, independent appraisal.
Can I get my own appraiser?
No. Your servicer will arrange an appraisal from a qualified and approved appraiser. If you get an appraisal that is not from an approved appraiser, you will have to pay the additional cost for a second appraisal from an appraiser who is on the servicer's list of approved appraisers.
How do I know if it's worthwhile to get an appraisal or home valuation?
The cost of an appraisal or broker's price opinion, known as a BPO, varies depending on factors like your location, property type, the value of your house and which service is required. Some investors will accept a BPO, which costs significantly less than an appraisal.
How do I prepare for the appraisal?
The letter your servicer sends you includes specific instructions for anything you're responsible for doing or having at the inspection. Check for the type of appraisal you must get and for requirements like specific forms, methods of fee payment etc.
What happens after the appraisal?
The appraiser will forward the results to your servicer as part of their service. Be sure to remember to request a copy for your records.
How will I know if my PrivateMI is going to be canceled?
Your servicer will contact you with the decision. It could take several weeks to review the information and make this decision. They will look at things like the loan payment history over the life of the loan and the original and current value of the property. Any one factor could alter the servicer's decision.
Do I get a refund when I cancel PrivateMI?
That will depend upon which PrivateMI plan your lender selected for you when you closed your loan. If you are eligible for cancellation of your PrivateMI, your servicer will advise if you are due a refund.
What is an escrow analysis?
Your lender set up an escrow account on your behalf to pay property taxes, PrivateMI and homeowners/flood insurance throughout the year. The money used to pay taxes and insurance comes from a portion of your monthly mortgage payment. An escrow analysis is provided by your servicer to determine what portions of each of those expenses have already come out of your escrow account. It will indicate if you have paid for PrivateMI in advance and if you might be eligible for a refund of part or all of that payment.
How do I get an escrow analysis?
Simply request one from your servicer as you go through the PrivateMI cancellation process.
How do I get a refund of excess premium paid?
Your servicer will arrange for a refund of any excess premium you have paid.