Private Mortgage Insurance: Cancel It and Save

Did you know that the Homeowners Protection Act of 1998 protects you from the abuses of Private Mortgage Insurance? If you are a homeowner that was required to pay for Private Mortgage Insurance by your lender, here is what you need to know about cancelling your policy and saving yourself a lot of money.

If you are a borrower with poor credit or have less than 20% for your down payment, your mortgage lender may require you to purchase Private Mortgage Insurance (PMI). This insurance protects the mortgage lender from losses if you default on your loan. These insurance policies can be quite expensive; legislation was enacted in 1998 to protect homeowners from mortgage lenders that abused PMI. This legislation set rules to protect homeowners by requiring insurance companies to terminate their policies once the borrowers meet certain criteria. These rules apply to any mortgage taken out after July of 1999 on a single family home. These rules do not cover FHA or VA mortgages or loans where the mortgage lender pays the Private Mortgage Insurance.

The legislation enacted states that Private Mortgage Insurance must automatically stop when a homeowner reaches 22% equity based on the original appraised value of the home. You can request that the PMI terminate when you have 20% equity if you have kept up on your payments. There are exceptions to every rule, and Private Mortgage Insurance is no different. If you have not kept up on your payments you may be required to continue your Private Mortgage Insurance.

Private Mortgage Insurance for the average home can cost as much as $500 per year. If you are unsure how much you are paying for PMI, contact your mortgage lender or escrow company for the details. To learn more about saving money on your mortgage, register for a free mortgage guidebook using the links below.