Understanding private mortgage insurance (PMI)
Your mortgage PMI questions answered
If you purchased your home with a down payment of less than 20%, your mortgage may include private mortgage insurance (PMI). PMI helps protect the lender if a borrower is unable to repay their loan, and the cost is included as part of your monthly mortgage payment.
To help you understand what it is and how it works, here are answers to some of the most frequently asked questions.
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Understanding PMI
Find the answers to frequently asked questions around private mortgage insurance.
What is PMI?
Private Mortgage Insurance (PMI) is a requirement when a homebuyer makes a down payment of less than 20% of the home’s value. PMI protects the lender against financial loss if the loan goes into default. Charges for the insurance are included in your monthly payment.
While PMI benefits the lender, it allows many homebuyers to purchase a home sooner without needing a large down payment.
When is PMI removed automatically?
Under federal guidelines, PMI is automatically terminated when your loan’s principal balance is scheduled to reach 78% of the original value of your property.
To qualify for automatic cancellation, your mortgage payments must be current. If your loan is not current, PMI will remain in place until your account is brought up to date.
Can I request PMI removal sooner?
In many cases, yes.
You may request PMI cancellation when:
- Your loan balance is scheduled to reach 80% of the property’s original value, or
- Your actual loan balance reaches 80% of the property’s original value ahead of schedule
Many homeowners reach this milestone sooner by making extra principal payments, which helps build equity faster.
What is "original value"?
The original value is the lower of:
- The home’s purchase price, or
- The appraised value established when the loan closed
This value is used to determine PMI cancellation eligibility.
How do I request cancellation?
To request cancellation, you need to:
- Submit a written request.
- Have a good payment history (no payments 60 or more days past due within the previous two years, and no payments 30 or more days past due within one year of the request).
- Provide, if requested and at your expense, evidence that the property has not declined below its original value and certifications that there are no subordinate loans or liens on the property.
Whether you’re wondering if you’re eligible for PMI removal or simply want to understand your mortgage options, we’re here to help.
Call us at 800.991.2221 or speak with a Consumers mortgage loan officer for personalized guidance.
Get the help you need from one of our mortgage loan officers.
Learn more about the mortgage application process and find the documents you'll need to get started, whether you’re buying your home in Michigan or anywhere else in the U.S. These resources are especially helpful for first-time home buyers or anyone who has never had a home loan before.
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