Cancellation of Private Mortgage Insurance (PMI)
Savings, Home Appreciation
Your savings could be significant. On a $100,000 loan with 10 percent down ($10,000), private mortgage insurance (PMI) might cost you $40 a month. If you can cancel the PMI, you can save $480 a year and many thousands of dollars over the loan. Check your annual escrow account statement or call your lender to find out exactly how much PMI is costing you each year.
Appreciation in Home Value
During the first few years of a typical mortgage, most of the monthly payment amount is interest charges. As a result, it may be many years before you reach 20 percent equity in your home. However, if home prices in your area are rising quickly, or if you make significant home improvements, you may see a jump in the current value of your home (and in your equity value). While the PMI Act does not require a mortgage servicer to consider the current property value, you should contact them to see if they are willing, and if so, what documentation they require to demonstrate the higher property value.
Additional provisions in the law (also see Disclosures Required)
- New borrowers covered by the law must be told - at closing and once a year - about PMI termination and cancellation
- Mortgage servicers must provide a telephone number for all their mortgage borrowers to call for information about termination and cancellation of PMI
- Even though the law's termination and cancellation rights do not cover loans that were signed before July 29, 1999, or loans with lender-paid PMI signed on any date, lenders or mortgage servicers must tell borrowers about the termination or cancellation rights they may otherwise have under those loans (such as rights established by the contract or state law)
Be sure to ask your lender or mortgage servicer (a company that collects your payments) for more information about cancelling your private mortgage insurance
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