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Eliminate PMI:
Cancellation of
Private
Mortgage Insurance:
Save You Hundreds of Dollars Each Year
If you put less
than 20 percent down on a home mortgage, lenders often require you
to have Private Mortgage Insurance (PMI). PMI protects the lender if
you default on the loan. The Homeowners Protection Act of 1998 -
which became effective in 1999 - establishes rules for automatic
termination and borrower cancellation of PMI on home mortgages.
These protections apply to certain home mortgages signed on or after
July 29, 1999 for the purchase, initial construction, or refinance
of a single-family home. These protections
do not
apply to government-insured FHA or VA loans or to loans with
lender-paid PMI.
For home
mortgages signed on or
after July 29, 1999, your PMI must - with certain exceptions - be
terminated automatically when you reach 22 percent equity in your
home based on the original property value, if your mortgage payments
are current. Your PMI also can be canceled, when you request - with
certain exceptions - when you reach 20 percent equity in your home
based on the original property value, if your mortgage payments are
current.
One exception is
if your loan is "high-risk." Another is if you have not been current
on your payments within the year prior to the time for termination
or cancellation. A third is if you have other liens on your
property. For these loans, your PMI may continue. Ask your lender or
mortgage service (a company that collects your payments) for more
information about these requirements.
If you signed
your mortgage before
July 29, 1999, you can ask to have the PMI canceled once you exceed
20 percent equity in your home. But federal law does not require
your lender or mortgage service to cancel the insurance.
On a $100,000
loan with 10 percent down ($10,000), PMI might cost you $40 a month.
If you can cancel the PMI, you can save $480 a year and many
thousands of dollars over the loan. Check your annual escrow account
statement or call your lender to find out exactly how much PMI is
costing you each year. |
Equal Housing Opportunity