| If the down payment on your home
was less than 20 percent of the sale price, your
lender probably required that you pay for private
mortgage insurance (PMI). This insurance protects
the lender in the event you default on the loan.
But PMI should not become a permanent fixture
on your mortgage payment. You should be able to
remove PMI once the equity in your home reaches
20 percent of the property value, either because
the loan balance has been decreased below 80 percent
or because there has been an appreciation of real
estate values in your neighborhood.
But don't wait for your lender to call you with
the good news. Lenders in most states are under
no obligation to tell you when your loan has reached
the point where PMI is no longer required, so
you could end up paying PMI premiums for 10 years
or longer.
Getting rid of PMI
Here's how to make sure PMI is removed once you
have 20 percent equity in your home:
• Before signing the mortgage note, ask
your lender for a written disclosure stating when
PMI premiums can be removed from the mortgage
payment.
• Keep records of payments, noting how much
of the principal is paid, and make sure you are
not late or delinquent in payments. Some lenders
require a minimum of 12 or 24 consecutive monthly
payments.
• When you believe you have reached 20 percent
equity, contact the lender or servicer, by phone
and in writing.
• You may need to pay for a new appraisal
of your property.
Other ways to build equity and remove PMI:
• Make an extra payment toward principal
each month. Even $50 a month can mean a dramatic
drop in your loan balance. For more information,
see the section on prepayment.
• Renovate your home. Add a room or a pool
that would increase the market value of the home.
• Call a real estate agent familiar with
your neighborhood to provide a competitive market
analysis of the value of your home, which may
have increased significantly since your loan was
issued.
• Refinance your home with a different lender.
For more information, see the section on refinancing.
|
