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Private Mortgage Insurance (PMI)

PMI is required on a Mortgage when the loan amount is more than 80% of the lesser of either the appraised value or the purchase price.

PMI is a premium included in the monthly Mortgage payment. It is insurance that protects lenders if borrowers default on their Mortgage. If your CEFCU Mortgage requires PMI, this will be explained when you apply, as well as how your payment is calculated, and approximately how long you’ll pay it. The upside? PMI allows you to buy the home you want with a low down payment. (Check out CEFCU’s low down payment options.)

Example

Five percent is a common down payment amount. So, if the purchase price of a home is $150,000, but the appraised value is $160,000, the down payment is $7,500 — 5% of the $150,000 purchase price.  To cancel PMI, the loan amount would need to be paid down to $120,000 (80% of the $150,000 purchase price, not the $160,000 appraised value).

When Can I Cancel PMI?

Once a year, CEFCU will provide you with an annual Home Protection Act (HPA) Notice. The Notice is a reminder of how you can request cancellation of PMI. To qualify to cancel PMI, your Mortgage balance must reach 80% based on the lesser of these values: appraisal, purchase price, or construction cost. If you applied extra principal payments or made a lump-sum payment(s) to reach 80%, that may also qualify you to cancel PMI coverage.

If you think you’ve met the criteria to cancel PMI coverage, you can request cancellation using the Request to Cancel PMI and/or Escrows form.

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