At a glance

  • The shift: The end of PMI is a date from your original loan, not your equity.
  • The number: 78% of the original price, read off the schedule.
  • The risk: Extra principal moves the request date and leaves the automatic one alone.

Two clocks on one loan

What I keep circling is that the statute reads the price you paid, not the value of the home today. The rule arrived in 1998 and was tightened in 2000, so it covers every conventional loan with PMI written since. At closing the servicer — the firm that collects your payment — must give you the amortization schedule. That table splits each payment between principal and interest, and it carries three dates [3].

  • Schedule date: the point when you may ask to cancel on the original schedule.
  • Paid-ahead date: the earlier point when you may ask, based on what you have actually paid.
  • Automatic stop: the point when the cover ends without anyone asking.

Only the first two involve a request. The earlier line is 80 percent of the price you paid; to cancel there, you send the servicer a letter and keep a clean payment record. You also stay current, show the home has not fallen below that price, and confirm that no second loan sits behind the first [2]. The value test and the second-loan test are where most letters fail, because the value test is about decline, not about the gain you think you have.

The automatic date needs no letter. It sits at 78 percent of the original value and is read off the original schedule. The statute tells the servicer to ignore the outstanding balance on the day it lands [1]. Paying extra does not pull it forward, because that date never looks at what you have paid.

Two limits sit behind it. The cover cannot run past the first day of the month after the midpoint of the loan’s term while you are current, which is 180 months on a 30-year note [2]. And a loan the lender classed as high risk when it was written can carry the insurance past both dates, if the closing papers said so [2].

By the numbers

  • 60 days: how late a payment may be in the older of the two lookback years; the recent year allows 30 [1].
  • 30 days: the point after which the servicer cannot charge more premium once a cancellation request is in [2].
  • 45 days: the window a servicer has to return unearned premiums, the prepaid coverage you did not use, after the cover ends [2].

What the gap costs

I ran the arithmetic on a $400,000 house bought with 10 percent down — a $360,000 loan at 7.00 percent, an assumption rather than a quote. The balance passes the earlier line in month 101 and the automatic date lands in month 115. Add $200 a month and the earlier line arrives in month 67, while the automatic date stays at 115 [2].

So the household paying extra has cleared a line the law already recognizes, and the premium keeps billing for four more years unless someone requests cancellation. The servicer has to restate those rights in writing each year [3], but the request still has to come from the borrower, and the disclosure that names the earlier date sits in a closing file most owners have not opened since they signed.

Where this bites:

  • The closing file sets the comparison. The original table and its earlier-line date sit in the closing file, not in the current statement [3].
  • A clean record is the filter. A payment 30 days late inside the past year, or 60 days late in the year before it, can stop a request [1].
  • A second loan blocks the route. A home equity line, or any loan registered behind the first, stops cancellation until it is paid off or moved behind a new lender’s claim [2].

That second-loan item is worth checking before anything else, because a household that opened a credit line for a remodel can sit well past the balance line with no route through [2].

The catch

My read is that the rule is narrower than the pitch. A house that gains value gives its owner no lever here, because both dates read the price paid at closing [1]. Appreciation matters only if the servicer chooses to accept a new appraisal under its own policy, and nothing in the statute makes it do that [2].

A decline cuts the other way, and that asymmetry is the part to carry away. A falling market can block the letter at the earlier line, since the borrower has to show the home has not dropped below the price paid [1]. The automatic date keeps to its schedule because it never looks at value at all [2].

The decision sits in the closing file: original schedule against today’s balance, checked against the earlier line on the first page [2]. If the balance is past it and the payment record is clean, cancellation is a letter. The Down Payment and PMI Calculator runs that same comparison before you send it. After that, the servicer owes the unearned premium refund [2].

Related reading

Sources