Mortgage Cancellation Insurance

Mortgage Cancellation Insurance refers to the homeowners' Protection Act of 1998 which allows you to request the cancellation of your Personal Mortgage Life Insurance, once you have 20 percent equity in your house. Your mortgage holder has the option of canceling it, but as long as your payment record is good, you shouldn't have a problem ending it. Once your equity reaches 22 percent, lenders are required to cancel PMI. If it isn't canceled, the lending institution is subject to fines and payment of your legal fees.

The lender also must return any premiums you paid beyond what you really owed. You must be informed, in writing, when you close on your house that you have private mortgage insurance. Lenders must explain PMI, and when you can cancel it. Your lender must notify you annually about when you can cancel your PMI. The law applies to mortgages taken out as early as July 29, 1999.

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