Reader: Private Mortgage Insurance, I Want It Gone!by Tim Manni
A reader contacted HSH about a problem she was having regarding the Private Mortgage Insurance (PMI) that was tacked on to her monthly mortgage payment. The reader commented how she desperately wanted the payments removed, as they were beginning to eat into her monthly budget. Insisting she was never late with a mortgage payment in all her years of owning homes, the reader was confused to why it was included in her loan in the first place.
First off, PMI is an insurance policy which protects the lender in the event that you, the borrower, will fail to make your mortgage payments. Generally, if you can not come up with a 20% down payment on your home, you will be required to purchase PMI as part of your loan.
The Good News: Unless you have Lender Paid Mortgage Insurance (LPMI), which is included in your interest rate and there for the life of your loan, PMI can be removed after you have attained a certain amount of Equity in your home.
For the borrower to initiate the cancellation of their PMI, they must first contact their lender in writing when their loan to value reaches 80%. At this point the cancellation remains purely voluntary on the part of the lender — they may still deny your cancellation. Yet, when the loan to value of your home reaches 78%, your lender is required to remove the PMI from your monthly mortgage payment.
Click here to find out more on PMI.