Eliminate PMI

What You Need to Know About Your Mortgage Insurance

Up to $700,000,000 per year is unnecessarily paid to Private Mortgage Insurance Companies by homeowners. If you are paying Mortgage Insurance or PMI (as it is regularly called), now is the time to check and see if you qualify to eliminate it from your monthly payment.

Below are some of the guidelines of carrying PMI.

1. You must determine the date you signed your mortgage. There are different rules for mortgages taken before July 29, 1999. These requirements are for those mortgages signed after July 29, 1999.
2. Your mortgage insurance will “automatically” drop off when your mortgage is paid down to 78% from its “original” value. That means that even if the value of your property has increased substantially, the lender is required to use the lesser of the two values.
3. Mortgage Insurance has a two-year waiting period before a lender can even consider dropping that portion of the payment. However, there are two exceptions to this rule: (In both instances-you must request that it be canceled.)
A. You have paid money towards the principal balance and have reached the 80% of the original value.
B. You have substantially improved the property (such as a room addition or a second story addition – just remodeling is not enough) and you can prove it with a new appraisal.
4. After two years, you can request that the mortgage insurance portion of your payment be dropped. However, it must meet these parameters:
A. You must provide a new appraisal. (The appraiser must be approved by your lender. The lender has the right to dispute the value.)
B. You must have a good payment history on your mortgage.
C. The Loan to Value Ratio must be 75% or less-based upon the new appraisal.
5. After five years, the same rules as #3 apply; however, the loan-to-value ratio increases to 80% of the appraised value.
6. If you have a second mortgages on your property, it will not affect your ability to get your mortgage insurance payment waived and it will NOT be considered in the loan-to-value calculations.

Each “type” of mortgage (i.e., adjustable rate, balloon, etc.) has its own set of regulations. In addition, some states have passed their own legislation, which makes canceling your mortgage insurance easier. However, I recommend that you call your lender and request their rules on what is required to eliminate it from your payment.

When you receive the letter of instructions from your lender, call me and I will help you determine what is needed and if you qualify.