Automatic Cancellation of Florida Private Mortgage Insurance

In the event that your mortgage sinks underwater, meaning that the equity in your home and property is less than the value of your mortgage, your Florida private mortgage insurance, or PMI, may be cancelled automatically. The truth is that most borrowers are entitled to have their PMI cancelled after a certain period of time regardless of these factors.

Understanding PMI

Florida private mortgage insurance, otherwise known as PMI, is the type of insurance that borrowers are required to have when they take out a conventional mortgage and put less than 20% of the borrowed amount down. This insurance is designed to cover the cost of the mortgage in the event that the borrower defaults on his or her payments. In most cases, it can be cancelled when the borrower reaches 20% equity in his or her home. This can be done in several ways, including paying down the balance of the loan or altering the home so that its value increases.

How it Works

When the borrower takes out a home loan, if he or she does not have at least 20% as a down payment, the bank or financier will require that borrower to have Florida private mortgage insurance to cover them in the even that they default on the payments. This is a necessity, much like carrying full coverage insurance on an automobile if you took out a loan to buy it. Although PMI isn’t incredibly expensive, there are costs associated with it—and many people work diligently to reach a point where the PMI is no longer needed.

Legal Entitlement

There is a point when borrowers can have their Florida private mortgage insurance cancelled, however. At the time when the balance of the loan falls to 78% of the value of the home at the time the mortgage was taken out, consumers can request that the PMI be cancelled. The good thing about this is that borrowers can still make this request, even if the borrower owes more on the mortgage than the home is currently worth. This is a little-known secret, and it isn’t always recommended. Borrowers who are experiencing difficulty when it comes to making their payments should always consider keeping their PMI.

Guidelines for PMI Cancellation

There are a few guidelines for cancelling PMI at the 78% mark, and these are dictated in the Homeowner Protection Act of 1998. According to these, homeowners must reach the 78% point through the normal repayment of their mortgages. This means that they cannot make extra payments to reach this point faster. The homeowner must also be current on the mortgage with no missed payments or late payments within a 12-month period, and homeowners are disqualified if they have any other liens on their homes.

While this automatic cancellation of Florida private mortgage insurance is for standard mortgages, there are some cases in which homeowners must reach 77% rather than 78%. You can speak with your lending institution for more information about the guidelines for your specific loan.