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Homeowner's Protection Act of 1998
This law established rules for automatic termination and borrower cancellation of PMI on home mortgages. The law applies to a great number of residential mortgages signed on or after July 29, 1999, including refinances. It does not apply to government-insured FHA or VA loans or to loans where the lender paid for the PMI. Ask your lender if your loan qualifies.

• The Act calls for automatic termination when you reach 22% equity in your home (based on the original property value).
  
  
• Your mortgage payments must be current, and you must not be considered a "high-risk" for default.
  
  
• The PMI may continue if your payment history is poor or if you have placed other liens on the property. Your lender can tell you more about the specifics.

Other provisions in the law,

• New borrowers must be told at closing and once a year about PMI termination and cancellation.
  
  
• Mortgage servicers must provide you with a telephone number where you can call for information about termination and cancellation of PMI.
  
  
• Lenders are obligated to tell borrowers who are not covered under the new law about the termination or cancellation rights they may have.

No matter when your loan was signed, you can ask to have the PMI canceled once you exceed 20% equity in your home. You might also be able to cancel the PMI if you can show proof that your home has increased in value, but lenders often have a minimum wait time before they will accept such evidence--typically two years.

Don't hesitate to ask your lender as many questions as necessary to help you understand every aspect of PMI. It's a great tool when used wisely.

Tools
Homegain has a handy calculator to help you determine if your home value has appreciated enough to warrant cancellation of PMI. You may have more than 20% equity and not know it.

Another Homegain calculator helps you calculate how long it will take to save for a downpayment when using PMI.

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