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October 2nd, 2008

Reader: Private Mortgage Insurance, I Want It Gone!

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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.

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6 Responses to “Reader: Private Mortgage Insurance, I Want It Gone!”

  1. Rebecca Wilder Says: October 2nd, 2008 at 1:28 pm

    Hi Tim,

    How are ya? Is it more customary for mortgage insurance to be included in the interest rate, or not? If it is not included in the mortgage rate, then is it included as an add-on to the closing statement?

    Interesting – guess that is just one more shoe to drop in the housing market. I can only assume that mortgage insurance premiums have been rising with the risk of default, which in some sense, can push a borrower toward delinquency.

    Thanks! Rebecca

  2. Tim Manni Says: October 2nd, 2008 at 4:39 pm

    Rebecca — Doing well, staying busy. Maintaining a blog is a full time job! PMI comes in four different payment options that apply the cost in various ways. LPMI, Lender paid Mortgage Insurance, is included in the interest rate and is there for the life of the loan. PMI can be applied up front, at closing, monthly, and yearly.

    For one thing PMI will be included in probobly almost every loan now, unless buyers are dropping a 20% down payment.

    I quickly learned any approach in lending that deals with at-risk borrowers seems to put the shaky borrowers at risk even further. Its kind of backwards how things work.

    Thanks for the comment!

  3. Jason Says: October 7th, 2008 at 3:02 pm

    Do you have a Private mortgage insurance (PMI) policy? If you do your PMI insurer has passed along their risk by buying a credit default swaps (CDS) to protect them in the event you have your home that your home is taken away from you. CDS and PMI are the same thing. Make people wanting to buy a home put at least 20% down if you don’t like them.

    http://nomedals.blogspot.com

  4. Mortgage reduction Says: October 15th, 2008 at 1:25 am

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  5. mortgage brokers Says: October 19th, 2008 at 3:11 pm

    mortgage brokers…

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  6. Hypotheek Check Says: August 7th, 2009 at 2:47 am

    Hi,

    Thanks for the info about ” Mortgage Insurance ” and it is all about money matters,
    insurance and security.The things to consider in this worldwide crisis.. . Now a days we need to track and secure our
    money management due to recession problem.

    Good luck for your further post!

    Best regards,

    Marc Jansen
    Hypotheek Check

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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