Homeowners that bought a home with conventional financing and made a down payment of less than 20% are likely paying for private mortgage insurance (PMI). Private mortgage insurance does not protect a homeowner against loss, it is to protect the lender or investor in case the borrower defaults on their loan.
Once an owner has 20% equity in their home by any means, improvements, paying down the balance of the loan or appreciation, the borrower can have the lender to cancel the private mortgage insurance policy. They just need to contact their lender in writing, complete a form provided by the lender and provide proof that there is more than 20% equity in their property. Typically a borrower can prove the amount of equity they have with a real estate appraisal completed by a state certified real estate appraiser.
The Homeowners Protection Act requires lenders to inform borrowers at closing and annually that they have the right to request mortgage insurance cancellation and how to do it. A borrower does not have to wait for their lender to inform them to remove the private mortgage insurance. If they have 20% or more in equity they can typically cancel it quickly. The law also requires lenders to automatically cancel the private mortgage insurance even if the borrower does not request it, as long as there is at least 20% equity in the property.
it is the lender's ultimate decision to cancel the PMI and they take various factors into consideration including the borrower's payment history. This could affect the lender's decision.
Lenders of high risk mortgages will automatically cancel the PMI at the mid-point of the loan.
Contact your lender today to determine the steps you need to take to remove the private mortgage insurance on your loan.
To find a local PMI removal appraiser enter the property's zip code in the search box below.
