Cancelling PMI From FHA Loans Endorsed Before June 3, 2013

Most buyers who obtain FHA loans were interested in the option to provide less money down. Since PMI is often charged on mortgages with less than 20% down, most FHA borrowers have PMI payments each month. The procedure for cancelling that fee depends on when the mortgage was endorsed by FHA. The following information on cancelling PMI from FHA loans endorsed before June 3, 2013.

Cancelling PMI Over Time

With every mortgage payment that you remit, you pay down a fragment of your balance. In the first several years, the fraction going towards interest is greater than the that towards the principal, but this steadily changes. PMI is automatically cancelled when the principal drops to 78% of the initial value. You may also send in extra payments to principal to reach this point quicker.

With a majority of loans, you may insist that PMI be cancelled when the loan reaches below 80%. It is definitely a wise move to monitor this to save on PMI charges for a few more months. Read your loan documents to see if this is allowed.

Increase in Home Prices

If home values improve, you might be able to cancel PMI more quickly. Lenders refer to the LTV ratio, which is calculated from the purchase price or the updated appraisal price of the property. If values go up quickly, your principal might be less than 80%, cancelling PMI as a result. To cancel PMI using this process, you must contact your Lender to order an appraisal. The Lender will charge you for the expense, but it pays for itself if your PMI is cancelled as a result. Additionally, you must have your loan for at least 5 years before cancelling PMI.

More on Cancelling PMI From FHA Loans

Mortgage programs continually change over time. This information is only a review of typical FHA loan conditions. It is important to review your specific loan documents regarding cancelling PMI from FHA loans. You may also reach out to your mortgage officer for more specific information.

About Scott Beard

Finding the right Realtor can be the difference between a happy, stress-free home buying or selling experience, and an unhappy, stressful experience. That’s why choosing the right Agent to begin with is key. I have helped hundreds upon hundreds of clients during my career and sold over $55 million in properties and look forward to putting my experience to work for you.
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