PMI, aka private mortgage insurance, enables individuals to buy their home with less than a 20% down payment. If you are one of the many people that is paying for PMI, at some point you have probably asked yourself “when can I do to stop paying these monthly PMI fees?” To be sure, there are many other things you would rather do with that money.
Each month when you make your mortgage payment, do you give any thought to exactly what that payment includes? For some of us, the mortgage payment pays down the mortgage loan, but also a portion goes into an escrow account to pay for property taxes and a variety of different types of insurance including homeowners and PMI.
If you purchased your home with a conventional loan and put less than 20% down, it’s highly likely you are paying for PMI. Private mortgage insurance protects the lender or investor against a loss if you decide to stop making the payments for any reason. Shockingly, a lot 0f homeowners pay this insurance long after it’s required simply because they haven’t realized that the property values in the area have increased sufficiently to give them an equity position of more than 80%. As a result, homeowners often pay thousands of dollars in unnecessary PMI premiums every year.
With a professionally prepared appraisal, the homeowner with PMI can determine whether the insurance is actually still required by the lender. Once you reach an 80% LTV (loan to value ratio) in your home by appreciation, improvements, paying down the principal balance or any of the above, you can request the lender to cancel the private mortgage insurance. You have to request, in writing, that the PMI be canceled and provide the lender with proof of sufficient equity of at least 20%. Some lenders will require an appraisal from their appraiser but this appraisal will be much more expensive than a private appraisal from Sammo Appraisal Group. An investment of a few hundred dollars could save you thousands over the life of your loan.
The Homeowners Protection Act requires lenders inform homeowners of any PMI they are paying and the requirements necessary to cancel it. Don’t wait for the lender to notify you that you are eligible to get rid your PMI. In most, if not all, cases, when you have that equity you can canceled.
PMI is for the lender’s benefit. All issues dealing with mortgage insurance are commonly handled by the lender. It’s also the lender who ultimately makes the decision when it comes to mortgage insurance and whether it’s still required or not. Therefore, one must stay in contact with the lending institution or mortgage servicer to inquire about this PMI insurance and the requirements necessary to cancel it.
Step 1 is to contact the lender or the servicer and ask them what their process is for cancelling PMI. They will be able to help you with the cancellation process. Every loan servicing institution will have different procedures. Ask your servicer or lender to provide, in writing, their specific requirements to cancel PMI.
Remember, it’s the servicer’s or lender’s decision and they’ll take many factors into consideration including the borrower’s payment history before starting the process of dropping this insurance. So, if you have PMI, be sure to always make your paments on time every month to insure the best chance possible to get your PMI canceled. This alone could alter the servicer’s or lender’s decision.
It’s in your best interest to keep the issues surrounding it’s cancellation in mind because no one is going to cancel your PMI for you. It’s up to you to stay of top of the situation. Take a proactive approach.
You are, ultimately, your own financial advisor, and even the smallest expenses should be eliminated if at all possible. By continuing to carry PMI, which is no longer required or needed, only decreases the amount of money you have available in your pocket or your bank account.
At Sammco Appraisal Group we look forward to helping people just like you rid themselves of unneccesary PMI insurance.
Call for your free initial consultation and we will help you to determine if you have enough equity in your home to cancel your PMI.
Call us today with your questions and also check out our ‘Praise’ page and see what other PMI Removal clients are saying about Kevin Howell and Sammco Appraisal Group.