Eventually, you can. You reach a point where the bank basically sees that you have enough equity in the house so the insurance isn’t necessary anymore. Federal law actually requires banks to cancel PMI when you hit certain thresholds. As the law puts it, this happens when “the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the secured property.” This is referred to as the loan-to-value ratio — the outstanding loan divided by the value of the property.
Even if you haven’t reached the magic “78", you can request cancellation at other times. The servicer is supposed to cancel the insurance at the halfway point — so, 15 years into a conventional 30-year mortgage.
Also, you have the right to ask for earlier cancellations — at 80 percent. The Consumer Financial Protection Bureau gives instructions for doing this:
- Your request must be in writing.
- You must have a good payment history and be current on your payments.
- Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.
- Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the value of the home when you first bought it. If the value of your home has decreased, you may not be able to cancel your PMI.
Of course, to claim cancellation under any of the rules, you should have a clean payment record.
You still can catch a break
While you’re waiting to meet these thresholds, however, you might be able to deduct your PMI costs. This is one of the tax breaks Congress keeps threatening to cancel and then renews at the last minute. PMI in 2017 was deductable, with income limits, but it may not be for 2018. Check with a qualified tax professional about the current status.