Finance Articles

PMI (private mortgage insurance) removal, easier than you think.

PMI Insurance is a cost added to the monthly payment of many conventional mortgage loans. Mortgage insurance helps protect lenders against the costs of foreclosure. Mortgage insurance provides what the equity of a higher down payment would provide to cover a lender's losses in the event of foreclosure.

The Homeowners Protection Act of 1998 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.

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 for more information about these requirements.

Did you know, even if you have not paid down your mortgage to 78% of your original purchase price, you can still ask the lender to remove this PMI and the payment they charge you monthly? Many lenders will remove your PMI when the value of your home has increased, your equity is above 20% and you have two years of a good payment history. You will have to provide the lender with an appraisal to verify that your equity is above 20%.

Do this to get rid of your PMI?

1. Contact your lender. a. Ask them to send you the procedures and requirements to remove your PMI insurance.

2. Order a real estate appraisal. a. If you feel you qualify for your lenders requirements, then order a real estate appraisal from a licensed or certified appraiser.

3. Submit a request to remove PMI. a. Providing you meet all the lenders requirements. b. Providing the appraised value indicates you have 20% or more equity (appraised value minus loan balance equals equity)

?Then start saving money!

Go here for more PMI information: Homeowners Protection Act of 1998

Chas W. Leeper, SRA has been a real estate broker for over 30 years; a certified and designated real estate appraiser for over 20 years; an author, sportsman and grandparent. He is currently the CEO of Southern California Real Estate and Appraisal Inc. More information about Mr. Leeper can be found under "principal appraiser" at : www.leeperappraisal.com

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