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    Are you throwing away your hard earned money away

You possibly are, if you are paying PMI Insurance

PMI or Private Mortgage Insurance is normally required when you buy a house with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure.  It allows lenders to accept a lower down payments than they would normally require. Mortgage lender will not remove this PMI insurance cost unless  proof is provided of an appreciated  value of your home of a minimum of (20%). Other limitations may also apply.

The decision on when to cancel the private insurance coverage does not depend solely on the appreciation of  your equity in the home. The final conditions for terminating a private mortgage-insurance policy is reserved  for the lender and any  investor who may own an interest in the mortgage. However, most lenders will allow termination of mortgage insurance when you have paid down your loan to 80% of the purchase value. It is not uncommon that the lender require that you carry the insurance policy for a set period of time before they will consider it's removal.

Please discuss with your lender any specific requirements for the removal of your particular insurance policy.

 

How do I know if I no longer require PMI Insurance?

First, you need to know how much you currently owe on your mortgage. Calling the customer service line to your mortgage lender or looking for your remaining balance on your monthly statement, will give you this information.  While you have them on the line, you can also request a copy of their procedures for PMI removal. It is important that you have them mail you a copy of the specific requirements in writing.  The documents you will receive will usually give you step by step instructions.

Then you will need to estimate the market value of your home.  This will be the most critical element for removing PMI.  You will need an appraisal of your home by a qualified licensed or certified real estate appraiser. This appraisal report will then be submitted to your lender to prove that you have exceeded 20% equity. Fees will vary depending on the complexity of the property or on the reporting requirements of the mortgage company.  Most appraisal fees fall between $350-$450. These numbers should only be used as a guide because other considerations may be included in a particular fee quote that are not covered in this summary.

Historical Facts

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 servicer (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 servicer 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.

Additional provisions in the law

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New borrowers covered by the law must be told - at closing and once a year - about PMI termination and cancellation.

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Mortgage servicers must provide a telephone number for all their mortgage borrowers to call for information about termination and cancellation of PMI.

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Even though the law's termination and cancellation rights do not cover loans that were signed before July 29, 1999, or loans with lender-paid PMI signed on any date, lenders or mortgage servicers must tell borrowers about the termination or cancellation rights they may otherwise have under those loans (such as rights established by the contract or state law).

 

Bulldog Appraisal Company

Phone: (818) 709-4106  Fax: (818) 709-4166