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. Find out more about FHA loans and Mortgage Insurance Premiums (MIPs).

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
L1000 – Escrow Dept.
345 St. Peter St.
St. Paul, MN  55102

FAX: (480) 383-0632


PMI FAQS

Private mortgage insurance (PMI) is an insurance policy. The borrower pays PMI when the loan-to-value (LTV) percentage of their property is 80% or higher. This coverage protects the lender or servicer from financial loss in case of default. Do you have other questions about PMI? To learn more, visit our Understanding Private Mortgage Insurance or PMI page in the Mortgage Topics in Depth section of the website.
Your ability to cancel PMI on your loan depends on a number of things, such as the date your loan originated; whether it was a refinance or a purchase loan; whether it is a fixed-rate or adjustable-rate mortgage; whether you occupy the home or not; etc. Federal law, state law, and investor guidelines may all play a role in determining whether you can cancel PMI. However, the important thing to know is that you only have to be eligible to cancel PMI under one of the three. Thus, you should be aware of some general criteria you have to meet if you want to cancel PMI:
  • You must have a good payment history. Generally, that means that none of your mortgage payments has been 30 days or more past due during the last 12 months or 60 days or more past due during the last 24 months.
  • You must be current on your payments.
  • Your request to cancel PMI must be in writing.
We’ll also need to order an appraisal or a broker price opinion (BPO) to confirm the market value of your property. The costs vary widely, but we’ll give you an estimate before the appraisal or BPO is performed. If you think you meet basic these criteria, review the information below to get an idea of whether you’re eligible to cancel PMI. Homeowners Protection Act (HPA) The HPA is the Federal law that gives consumers the right to remove PMI under certain circumstances. If you can answer Yes to each of the following three questions, then your loan is covered by the HPA:
  1. Did your loan originate on or after July 29, 1999?
  2. Is your loan secured by a single-family home?
  3. Is that home your principal residence?
If you answered No to any of the questions, scroll to the Investor Guidelines section below to determine if you may be able to cancel PMI based on investor guidelines. If you answered Yes to all three questions, the HPA gives you the right to request that PMI be cancelled on the date that the principal balance of your mortgage (1) is first scheduled to reach 80 percent of the original value of your home or (2) actually reaches 80 percent of the original value of your home, based on payments made. (This percentage is commonly referred to as loan-to-value or LTV. Thus, if the original value of your home was $200,000 and the principal balance of your loan is $160,000, your LTV is 80% ($160,000 ÷ $200,000 = 0.80, or 80%).) What does “original value” mean? For purchase transactions, it means (a) the sale price of the property or (b) the appraised value of the property at the time of closing, whichever is less. So, if you bought your home for $195,000 but it appraised for $200,000, its “original value” is $195,000. For refinance transactions, “original value” means the appraised value of the property that was relied upon to approve the transaction. If you think you qualify to cancel PMI based on your LTV and other requirements, click here to access our Authorization for Appraisal/BPO form. Complete the form and send it to us along with your written request to cancel PMI to: • e-mail: @ditech.com or • mail: Ditech Financial LLC L1000 – Escrow Department 345 St. Peter Street St. Paul, MN 55102 or • fax: 480-383-0632 Investor Guidelines Fannie Mae and Freddie Mac have their own guidelines for determining whether you may cancel PMI on your loan, and there are differences between the two. Therefore, the first thing you’ll want to know is whether your loan is owned by Fannie Mae or Freddie Mac. To find out, call us at 1-800-xxx-xxxx or visit Fannie Mae at https://www.knowyouroptions.com/loanlookup or Freddie Mac at https://ww3.freddiemac.com/loanlookup/. If neither Fannie Mae nor Freddie Mac owns your loan, then we’ll have to determine if your investor has specific guidelines for PMI cancellation (many do not). Regardless, you should scroll to the State Law section below to determine if you may be able to cancel PMI based on the laws of your State. If either Fannie Mae or Freddie Mac owns your loan and, after reviewing the information below, you think you qualify to cancel PMI based on your LTV and other requirements, click here to access our Authorization for Appraisal/BPO form. Complete the form and send it to us along with your written request to cancel PMI to: • e-mail: @ditech.com or • mail: Ditech Financial LLC L1000 – Escrow Department 345 St. Peter Street St. Paul, MN 55102 or • fax: 480-383-0632 Fannie Mae Fannie Mae offers two methods for determining whether PMI may be cancelled on your loan: the Current Value Method and the Original Value Method. The Current Value Method compares the outstanding balance of your mortgage loan against the current value of the property. Under the Current Value Method, the value of the property must be evidenced by an appraisal that is (a) based on an inspection of both the interior and exterior of the property and (b) ordered, and directly received, by Ditech. The Original Value Method compares the outstanding balance of your mortgage loan against the original value of the property. Under the Original Value Method, the property’s current value (a) must be at least equal to the original value, but (b) may be verified by either a BPO, a certification of value, or an appraisal that is ordered, and directly received, by Ditech. Use the chart below to determine the LTV requirements that apply to cancelling PMI under Fannie Mae guidelines.

 

 

 

Property Type

Method

Loan Originated

Lien Type

1-Unit Primary

2-4 Unit Primary

2nd Home

1-4 Unit Investment

Original Value

Before July 29, 1999

First

LTV has reached 75%†

 

LTV has reached 80%‡

LTV has reached 70%

LTV has reached 75%†

 

LTV has reached 80%‡

LTV has reached 70%

Subordinate

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

On or after July 29, 1999

First

LTV is first scheduled to reach 80% or actually reaches 80%

LTV has reached 70%

LTV is first scheduled to reach 80% or actually reaches 80%

LTV has reached 70%

Subordinate

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

Combined LTV reaches 70% of the property value at the time the subordinate lien was originated

Current Value

 

First

       Loan originated less than two years ago:  LTV is 75% or less IF you have made improvements to the property that have increased its value.

       Loan originated between two and five years ago:  LTV is 75% or less

       Loan originated more than five years ago:  LTV is 80% or less

LTV is 70% or less

       Loan originated less than two years ago:  LTV is 75% or less IF you have made improvements to the property that have increased its value.

       Loan originated between two and five years ago:  LTV is 75% or less

       Loan originated more than five years ago:  LTV is 80% or less

LTV is 70% or less

Subordinate

LTV is 70% or less

LTV is 70% or less

LTV is 70% or less

LTV is 70% or less

† applies only to loans delivered under a negotiated contract that prohibits the cancellation of PMI until a specified term has elapsed ‡ applies to loans not delivered under a negotiated contract that prohibits the cancellation of PMI until a specified term has elapsed Freddie Mac Freddie Mac offers two methods for determining whether PMI may be cancelled on your loan: the Current Value Method and the Original Value Method. The Current Value Method compares the outstanding balance of your mortgage loan against the current value of the property. The Original Value Method compares the outstanding balance of your mortgage loan against the original value of the property. Under either Method, the LTV ratio and/or current value must be verified by a BPO or appraisal that (a) includes an interior and exterior inspection and (b) is ordered, and directly received, by Ditech. Use the chart below to determine the LTV requirements that apply to cancelling PMI under Freddie Mac guidelines.

 

Property Type

Method

1-Unit Primary

2-4 Unit Primary

2nd Home

1-4 Unit Investment

Original Value

LTV has reached 80%

LTV has reached 65%

LTV has reached 80%

LTV has reached 65%

Current Value

       Loan originated less than two years ago:  LTV is 80% or less IF you have made substantial improvements to the property that have increased its value.

       Loan originated between two and five years ago:  LTV is 75% or less

       Loan originated more than five years ago:  LTV is 80% or less

       Loan originated less than two years ago:  LTV is 65% or less IF you have made substantial improvements to the property that have increased its value.

       Loan originated more than two years ago:  LTV is 65% or less

       Loan originated less than two years ago:  LTV is 80% or less IF you have made substantial improvements to the property that have increased its value.

       Loan originated between two and five years ago:  LTV is 75% or less

       Loan originated more than five years ago:  LTV is 80% or less

       Loan originated less than two years ago:  LTV is 65% or less IF you have made substantial improvements to the property that have increased its value.

Loan originated more than two years ago:  LTV is 65% or less

State Laws If your property is located in California, Minnesota, New York, or Washington, the laws of those State may give you the right to remove PMI even if you were unable to do so under the HPA or investor guidelines. If after reviewing the information below you think you qualify to cancel PMI based on your LTV and other requirements, click here to access our Authorization for Appraisal/BPO form. Complete the form and send it to us along with your written request to cancel PMI to: • e-mail: @ditech.com or • mail: Ditech Financial LLC L1000 – Escrow Department 345 St. Peter Street St. Paul, MN 55102 or • fax: 480-383-0632 California If your property is located in California and your loan is not owned by an institutional third party, such as Fannie Mae or Freddie Mac, you may be eligible to cancel PMI under California law if you meet all of the following conditions:
  • Your loan originated on or after January 1, 1991;
  • Your loan is secured by an owner-occupied, one- to four-unit, residential real property;
  • The date of your Note is at least two years prior to the date of your request to cancel PMI;
  • Your monthly payments of principal, interest and escrow were current at the time of your request to cancel PMI;
  • You have a good payment history (i.e., none of your monthly payments has been more than 30 days past due over the 24-month period immediately preceding the request);
  • No notice of default has been recorded against the property as a result of your nonmonetary default during the 24-month period immediately preceding the request; and
  • The LTV is not more than 75% of either (a) the sale price of the property at origination (provided that the current fair market value of the property is equal to or greater than the original appraised value used at the origination date) or (b) the current fair market value of the property as determined by an appraisal.
Minnesota If your property is located in Minnesota, you may be eligible to cancel PMI under Minnesota law if you meet all of the following conditions:
  • The LTV is not more than 80% of the current fair market value of the property securing the loan;
  • You have a good payment history (i.e., none of your mortgage payments has been 30 days or more past due within the past 12-month period or 60 days or more past due within the past 24-month period);
  • Your loan originated at least 24 months prior to the date of your request to cancel PMI; and
  • Your property is owner-occupied.
New York If your property is located in New York, you may be eligible to cancel PMI under New York law if you meet all of the following conditions:
  • Your loan is secured by a first lien on real estate; and
  • The LTV is 75% or less of the appraised value of the property at origination.
Washington If your property is located in Washington and your loan is not owned by an institutional third party, such as Fannie Mae or Freddie Mac, you may be eligible to cancel PMI under Washington law if you meet all of the following conditions:
  • Your loan originated on or after July 1, 1998;
  • Your loan is at least two years old;
  • The LTV is (A) not more than 80% of the current fair market value of the property securing the loan and either (a) if your loan was made to purchase the property, is less than 80% of the lesser of the sales price or the appraised value of the property at origination, or (b) if your loan was not made to purchase the property, is less than 80% of the appraised value of the property at origination;
  • Your monthly payments of principal, interest and escrow were current at the time of your request to cancel PMI;
  • You have a good payment history (i.e., none of your monthly payments has been more than 30 days past due over the 12-month period immediately preceding your request to cancel PMI); and
  • You have not been assessed more than one late penalty over the past 12-month period.
To learn more about PMI and PMI cancellation, visit the Understanding Private Mortgage Insurance or PMI page.
Seasoning is a mortgage industry term that describes loans that have been in good standing for a reasonable amount of time, usually 2 years. If Fannie Mae or Freddie Mac owns your mortgage, seasoning requirements most likely apply to you. In general, you may not be able to cancel private mortgage insurance (PMI) if your mortgage seasoning is less than two years unless other requirements are satisfied. However, your lender or servicer may waive seasoning or other requirements in some situations.
  1. Lower LTV: For mortgages seasoned between 2-5 years, the required loan-to-value or LTV ratio must reach 80% or less.
  2. Property Improvements: Substantial improvements to the property have increased the market value.
  3. Code Compliance: Improvements must conform to local zoning and building codes.
Read more about PMI
An amortization schedule is a timetable for payment of a mortgage. It shows the amount of each payment applied to interest and principal, and the remaining balance based on the loan terms.
MIP or Mortgage Insurance Premium is part of the FHA mortgage insurance program only. FHA self-insures their loans using these funds. FHA borrowers can choose to pay an upfront premium (usually financed) or an annual premium paid in monthly installments. MIP cancellation rules may have changed recently. Please check the Single Family Upfront Mortgage Insurance Premium (MIP) page on the FHA website for the latest information.  As of January, 2015:
  • 30-year FHA mortgages predating June 3, 2013: In general, MIPs will automatically terminate for these loans if they meet two conditions. The loan must have reached 78% LTV and the MIP needs to have been paid for at least 60 months.
  • 15-year FHA mortgages that predating June 3, 2013: MIP automatically drops from these loans once they reach 78% LTV. For loans with FHA case numbers assigned on or after June 3, 2013—and with greater than 90% LTV at origination—MIP will remain in effect. For any loans under 90% LTV at origination, MIP is required for 11 years.
  • Mortgages with an FHA case number assignment date on or after June 3, 2013: FHA insurance can be terminated by the servicer or holder if the mortgage is paid in full before the maturity date.
To learn about different kinds of FHA loans, visit the FHA loans website. Learn more about private mortgage insurance