About
Advertisements
Ad
PMI, or private mortgage insurance, is usually necessary when a mortgagee puts down less than 20% on the down
payment. Private mortgage insurance protects the lender if the mortgagee defaults on the loan but does not protect the borrower. This kind of insurance is expensive and is based on the amount of the mortgage. This insurance is usually dropped once homeowners had achieved 20% equity in their home.
Unfortunately, it became a practice for some lenders in the 1990′s to take advantage of these insurance payments by failing to tell homeowners when they reached enough equity. The homeowners in turn would continue to pay unaware. In 1998, the Homebuyer’s Protection Act passed which required lenders to inform homeowner’s when the equity has reached 20% and to automatically end the insurance when the home equity reached 22%. In cases where home appreciate caused the equity to go above required levels, the HPA does not require the lender to cancel the PMI.
While most lenders will drop the insurance when the threshold is reached, others will still require additional follow up from the borrower. As directed by the HPA, the lender must discontinue PMI within 30 days of the termination or cancellation date. After cancellation, the lender is required to send notification that coverage has been dropped and that no payments need to be made in the future. If your equity has been reached but you are still paying on your PMI, here are some steps to take to ensure proper cancellation.
Make Initial Contact
If you believe you no longer need PMI because you have enough equity built up, contact your mortgage company and confirm what the percentage is for canceling PMI and where you stand. Most lenders require between 20-25%. Whatever information you learn from this call, ask that the lender mail you written confirmation about the equity percentage required on your loan.
Is There An Appraisal Involved?
When you are speaking to your lender, ask if there is a property appraisal required to drop PMI. If there is, ask the lender to send you a list of the appraisers that have been approved and that you might be required to use. If an appraisal is required, note that it will be your responsibility to pay for it and it will generally cost you about $400. Have the appraisal completed. If the appraisal confirms you have reached enough equity, you need to write a cancellation letter and mail it to your lender.
Confirm The Cancellation
Ask your lender where to send a cancellation letter. The letter you write should be simple and include the following items:
- the current value of your home
- the total amount of your loan
- declaration that you wish to end your PMI
Mail the letter, along with a copy of the appraisal. Send it certified so you’ll be sure that they received it and when. Follow up with your lender when you confirm they received your letter if you do not receive written confirmation in a few weeks. Make sure to keep an eye on your bill to be absolutely sure that your PMI has been canceled and you are no longer paying for the insurance.
Related Content:
- Who is to Blame for the Credit Crunch? There are many lenders currently under investigation for fraud, perhaps most notably the nation's largest mortgage lender, Countrywide Financial. Even if Countrywide is found to be guilty of fraud, one company alone (even if it...
- When Buying a Car, Is GAP Insurance Worth It? This past weekend, my wife and I went car searching. While it may seem like a daunting task dealing with used car salesman, I find it kind of fun. I suppose it becomes a little...
- Do You Sincerely Want to Improve Your Credit? Credit has become a noose to many first time home buyer. There are ways to loosen that noose. One way is to ga copy of your credit report from all three credit bureaus. The credit...
- For Some Borrowers, Foreclosure Is Not The End In todayâs market of souring home loans in the midst of a persistent recession and record levels of unemployment, banks have foreclosed on many more homes than in any time in recent history. Some areas...
- Mortgage APR Made Simple Image by mtsofan via Flickr This post is written by Steven Parker. Steven Parker is a financial writer and contributor for the last five years. He specializes in mortgage and real estate industry and has...
5 users resposed " How To Cancel Your PMI Insurance "
June 28 2009
[...] How To Cancel Your PMI Insurance | Fine-Tuned Finances [...]
June 28 2009
[...] How To Cancel Your PMI Insurance | Fine-Tuned Finances [...]
June 30 2009
[...] presents How to Cancel Your PMI Insurance posted at [...]
July 5 2009
[...] presents How to Cancel Your PMI Insurance posted at Fine-Tuned [...]
July 6 2009
[...] at Fine-TunedFinances explains how to cancel your mortgage insurance when you reach 20-25% equity in your home. Surprise! The bank might not do this automatically [...]
Our Sponsors
Archives
Site Information
Resources
UK IVA Resource
Visit Credit Loan for deals on credit cards.
Invoice discounting from one of the leading invoice factoring companies.
Compare Australian Car Finance
Lending Club Scam
Read our write-up on Lending Club to learn if it's a scam or the real thing.
Saving bonds
Compare a variety of leading savings bonds, ISAs and investments all in one place
Provident Cash Loans
Provident provide quick unsecured loans for people with bad credit history.
Bad credit loans - Real Finance
Real Personal Finance specialize in unsecured loans for people with bad credit history
Instant decision loans
Use our experts to find loan deals tailored to suit your circumstances.
For rising debt problems, consider an IVA with Debt Free Direct.
most commented post
- » MagicJack – Scam or Real Thing? - 31
- » Wells Fargo, US Bank, Bank of America and Citibank are on the Brink of Bankruptcy - 27
- » What Happened to Prosper.com? - 13
- » Money Merge Accounts – Are They Real and Do They Work? - 8
- » Three of the Unhealthiest Restaurants in the US and How to Eat Healthy at Them. - 7
- » 3 Reasons Debt Consolidation Loans May Not Be The Best Option For Debt Relief - 7
- » The Danger of Reverse Mortgages - 7
- » Hyped-Up Cures or Cash Thievery? - 7
- » How To Save Money On Prescription Drugs - 7
- » Save Money On Your Cell Phone Bill - 7
recent entries
- Prime Rate Website Offers Wall Street Journal Subscription Discounts
- No Medical Exam Life Insurance Page Added to FedPrimeRate.com Website
- FedPrimeRate.com Now Recommending Small Business Credit Cards
- Why You Shouldn’t Tap Into Retirement Funds
- How to Bridge the Gap in College Savings
- Debt Continues to have a Stranglehold over US Consumers
- Tips for the Unemployed
- Should You Pay Points on a Mortgage?
- Debt Solutions for Severe Debt Problems
- Are No-Exam Life Insurance Policies Worth It?
recent comments
- samanta: uCDGws http://djb3jDdmjckow30cnjcmd61 l0dy.com
- laina: It seems to be an pretty good idea to get out of the debt problems. Thank you from the advice laina
- låne penge: Yes you must have to get rid off your bad credit history to get back on the track again låne penge
- lån: No and the account with the unemployt are only growing bigger lån
- Penge: Great tip for us parent with babies. Thanks a lot lån penge


Recent Comments