Being Canceled Is A Good Thing
Unlike FHA mortgage insurance, borrower-paid mortgage insurance (BPMI) can be canceled. That’s a good thing because it can lower your monthly mortgage payment, which can add up to significant savings over time.
According to the federal Homeowners Protection Act of 1998 (HPA):
- You can ask your loan servicer to cancel your BPMI when you believe the unpaid balance of your loan is 80% or less of your original property value. Your cancellation request is subject to the HPA requirements and may necessitate a new property appraisal to verify that its value has not declined.
Your request is also subject to a number of loan servicer requirements, including confirmation that your:
- mortgage payments are current
- payment history is satisfactory
- property has no additional liens placed on it
- property value has not declined below its original value
- Your loan servicer must cancel your BPMI when the unpaid balance of your loan is scheduled to reach 78% of your original property value, provided your loan is current, or when it reaches its halfway point (e.g., 15 years on a 30 year mortgage).
You can also submit a written request to your loan servicer to cancel your BPMI if you can demonstrate a significant increase in your property value; for example, by building an addition to your home, reducing your mortgage with extra principal payments or as the result of an overall increase in your neighborhood values. You should contact your loan servicer directly for specific rules and regulations.
Please note that MI cancellation under the HPA only applies to loans with BPMI for single-family, primary residences. (Loans with LPMI can only be canceled when they are paid off or refinanced.) Some states, notably NY, also have cancellation laws that predate and can supersede the HPA. You should contact your loan servicer directly to ask about canceling your BPMI.