Private Mortgage Insurance Removal
First of all, what is Private Mortgage Insurance?
Private Mortgage Insurance is not insurance that protects you the buyer. The mortgage company buys this insurance when you take out a conventional loan and do not put at least 20% down. This insurance is paid by you, usually included in the payment and unless you request its removal will stay on the loan the entire 15 or 30 year period. There are even cases where buyers are paying PMI when they only owe $20,000 on a $300,000 house.
What Do I Do To Remove?
Mortgage companies vary greatly in what they require in order to successfully have Private Mortgage Insurance removed. Below are step-by-step directions to have PMI removed from your loan. Call your mortgage companies customer service department and ask for full instructions for the removal of PMI. If the person answering the phone doesn't seem knowledgeable, ask for a supervisor. Be sure to get this in writing. Even if you buy your house considerably below the appraised value don't expect the mortgage company to consider removing the PMI until you have at lease 1-year seasoning on your loan. Some mortgage companies require at least 2 years. After this waiting period you can make the request. Even if you wait 1 or 2 years, depending on the mortgage company, you will not be able to remove the PMI if you were late on any of the payments. Remember your payment is due on the first of each month and late generally on the 15th, 16th, or 17th.
What Can I expect The Mortgage Companies To Require?
Most mortgage companies want to know for sure that you owe 80% or less loan to value. For example. If the house is worth $100,000, your loan value must be 80% or less. In order to determine the value most mortgage companies will require a fee-based appraisal from one of their approved appraisers. Some mortgage companies have started accepting a professional CMA, which is what a good Realtor can provide for you at no cost. Once all these items are in place chances are you can have the PMI removed saving you several hundred dollars per year. If your loan was originated after July 29th 1999 the mortgage company must remove mortgage insurance once you reach 22 percent equity in your house automatically. The kicker here and what is in the fine print is this is based on the original appraisal and not on any increase in value. Keep in mind that if your loan was originated before July 29th 1999 federal law does not require your lender or mortgage service company to cancel this insurance.
- Call Mortgage Company for written instructions.
- Waiting period 1 to 2 years.
- Proof of value through a fee based appraisal or Realtor CMA
- Perfect payments through the waiting period.
- Letter from you requesting PMI removal.
One word of warning! If your neighborhood is experiencing a downturn in values, you will have more difficulty removing the PMI. Call a good professional Realtor for help and advise when attempting the removal of PMI. Use a Realtor with a CRS or GRI Designation or a Realtor who is a Broker and knows what to do.