Question by Brian: When is PMI removed on an underwater refinance?
I am refinancing my mortgage which has PMI. The new mortgage will also have PMI. If we assume my property doesn’t drastically increase in value, when can PMI be removed from my mortgage (at my request):
a) When my refinanced loan balance is 80% of the first loan’s original amount.
b) When my refinanced loan balance is 80% of the refinanced loan’s original amount.
c) When my refinanced loan balance is 80% of my appraised home value.
Answer by the kid
It is removed based on what is in the contract, not a your request. Normally it would be once the loan is below 80% LTV (Loan to Value).
Give your answer to this question below!
C is your answer.
You need to check with the mortgage holder
as to their policy.
You need to ask the bank to consider your
request when you get to LTV of 80%…loan to value
Read the fine print of your PMI policy
None of your choices are 100% correct answers.
Under Home Protection Act of 1998, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.
Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.
For high risk loans, mortgage lenders or servicers are required to automatically cancel PMI coverage once the mortgage is paid down to 77 percent of the original value of the property, provided you are current on your loan.
Under HPA, if PMI has not been canceled or otherwise terminated, coverage must be removed when the loan reaches the midpoint of the amortization period. On a 30-year loan with 360 monthly payments, for example, the chronological midpoint would occur after 180 payments. This provision also requires that the borrower must be current on the payments required by the terms of the mortgage. Final termination must occur within 30 days of this date.