When to Get Private Mortgage Insurance Dropped

PMI must be cancelled automatically when the loan’s balance reaches 78% of the home’s original value, but you may be able to drop it sooner.

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Question: I’ve been paying more than $1,000 every year for private mortgage insurance on my home. When can I ask for the PMI to be dropped? --S.S., Salt Lake City, UtahAnswer:

If you took out your loan after July 29, 1999, your lender must cancel PMI automatically when the loan’s balance reaches 78% of the home’s original value (usually the purchase price), based on your original payment schedule. You may be able to have PMI canceled at a balance of 80% of the original value if you have a good payment history and an appraisal verifies that the property has not declined in value, says Tom Goyda, of Wells Fargo.

Some lenders let you cancel PMI based on the property’s current value if you’ve had the loan for at least two years. You may need a balance of 75% of the current appraised value if you closed on the mortgage less than five years ago, says Scott Haymore, of TD Bank. The rules for loans made before 1999 vary by lender and state.

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.