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  • Understanding Private Mortgage Insurance (PMI)

Understanding Private Mortgage Insurance (PMI)

What Is Private Mortgage Insurance?

If your down payment on your conventional mortgage loan was less than 20% of the , you may have Private Mortgage Insurance or PMI. Low down payments can make purchasing a and easier, but it typically increases the risk to mortgage lenders. PMI helps reduce this risk by protecting the lender from financial loss if the defaults on the loan. Customers with PMI pay for it as part of their monthly mortgage payment. A homeowner may be required to pay PMI premiums until their Loan-to-Value ratio reaches 80% or less.

What is Loan-to-Value (LTV)?

Loan-to-Value or LTV is a percentage that describes the ratio of a loan amount to the total value of the property. Your LTV is based upon the original value of your home. “Original value” means either the appraised value or the purchase price of the property, whichever is lower.

How to calculate LTV

Here’s how LTV works. Let’s say the appraised value of your home was $200,000 at the time you closed your loan. Let’s also say that the mortgage balance is $160,000. By dividing $160,000 by $200,000, you get 0.8. Your LTV is 80%. Remember, LTV is based on the appraised value or the purchase price, whichever is lower.

Do all mortgage loans with smaller down payments have PMI?

No. Several types of mortgage loans do not require PMI. VA (Veteran’s Administration) loans, and some other nonconventional loans do not require PMI. FHA (Federal Housing Administration) loans require a different kind of mortgage insurance.

What does PMI cost?

Your lender or servicer calculates PMI fees based on your loan and your situation. PMI usually costs approximately 0.25% to 2% of your loan balance each year. Your specific PMI charges on:
  • the size of the mortgage loan
  • the down payment paid
  • length of the loan term
  • your credit score
PMI premiums have been tax-deductible in the past, but this tax-deductible status has changed back and forth more than . Please check with your tax preparer or financial advisor before claiming your PMI fees as a deduction on your taxes.

How does PMI work?

Your lender is required to provide you with a written PMI payment schedule at closing. This schedule should explain how long it would take you (in months and years) to pay 20% of the . After closing, PMI fees become part of your mortgage payment, usually listed on your statement under Insurance.

Cancelling PMI

PMI is usually not a permanent part of a mortgage payment. When it ends depends on your particular loan, your investors, your property, your LTV ratio, your payment status, or other conditions. We’ve covered most of your PMI cancellation options and criteria below. Remember, every loan is different. If you want to cancel PMI on your loan, Ditech will work with you on your options.

How to request PMI cancellation at 80% LTV

You may be eligible to request PMI cancellation once your loan has reached 80% LTV. You may reach 80% LTV through regular payments based on your original amortization schedule. Some customers reach 80% LTV faster by making additional payments to reduce the principal balance. Ditech complies with the federal Homeowners Protection Act (HPA) for PMI on loans that closed on or after July 29, 1999. There are two steps to request PMI removal or cancellation under HPA.
  1. Good payment history. This is required for cancellation. Good payment history means:
    1. You have had no payments that are 30 days or more past due in the prior 12 months
    2. You have had no payments that are 60 days or more past due in the prior 24 months
    3. You are current on your mortgage .
  2. Authorize . This is a requirement for cancellation. There is a charge for an appraisal. To qualify for PMI cancellation, we must confirm that the value of your property has not declined below the original value.
For instructions on mailing or faxing your PMI cancellation request, see “How do I request PMI cancellation?” at the bottom of this page.

How to request PMI cancellation at above 80% LTV

In some cases, you may be able to cancel PMI on a loan with an LTV greater than 80%. If your loan has not reached 80% LTV, the federal Homeowners’ Protection Act (HPA) does not apply. Each loan and loan investor has requirements that may affect your eligibility above 80% LTV. In this case, Ditech will review your loan requirements to check your eligibility to cancel. The PMI cancellation process for loans above 80% LTV is likely to require an appraisal on your property and good payment history, similar to the 80% LTV requirements, above. See instructions for mailing or faxing your PMI cancellation request at the bottom of this page.

How to request PMI cancellation at 78% LTV

It isn’t necessary to request PMI cancellation at 78% for many customers. If the following is accurate for your loan, your PMI may automatically stop at 78% LTV:
  • Your original amortization schedule shows your loan at 78% LTV
  • Your property is a single-family, owner-occupied home
  • You are current on your mortgage payments.
See instructions for mailing or faxing your PMI cancellation request at the bottom of this page.

How to request PMI cancellation at your loan schedule midpoint

With some types of loans, you may reach the midpoint of your amortization schedule before the 78% date. Some examples of this include an interest-only period, a principal forbearance, or a balloon payment. For those loans, we will automatically terminate PMI if you reach the midpoint of your loan’s amortization schedule on or before the 78% date. If you are not current on your payments on this date, we will not be able to terminate PMI until the month after your payments are up-to-date. See instructions for mailing or faxing your PMI cancellation request at the bottom of this page.

How to request PMI cancellation based on government or state

If your home has increased in value since your loan originated, you may be eligible for PMI cancellation under investor requirements.
  • Certain states—such as Minnesota, New York, and California—have additional or different requirements for cancelling PMI.
  • If you have a government loan, such as an FHA, RHS or VA loan, other requirements for PMI may apply.
See instructions for mailing or faxing your PMI cancellation request at the bottom of this page.

Why was my request to cancel PMI denied?

Some requests to cancel PMI are denied for specific reasons. Loans may require a longer PMI coverage period due to the following:
  • if your home value has dropped
  • if you have had multiple late payments
  • if you or your loan does not meet other eligibility requirements.
  • If your loan has not met the necessary seasoning requirements.
Are you struggling to make payments? Ditech can help.

How do I request PMI cancellation?

Based on your LTV and other requirements, are you ready to cancel PMI? Here’s how to start the request process.

Request PMI cancellation by mail or FAX

Write us a letter requesting PMI cancellation. Include your authorization for Ditech to order an appraisal on your property and assess that cost to your account. Mail or FAX this letter to: Ditech Financial LLC T-456 -Escrow Dept.​ 345 2100 E Elliot Road Tempe, AZ 85284FAX: 1-866-870-9919
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