How to Cancel Private Mortgage Insurance
June 5th, 2013
June 5th, 2013
When you purchased your home, did you have to take out a mortgage loan with private mortgage insurance (PMI), because you didn’t have enough money to make a 20% (or more) down payment on your home?
Private mortgage insurance can help you buy a home with a lower down payment, but it also protects the lender in case you’re not able to repay your loan; and the lender isn’t able to recover their costs if your home is foreclosed upon and resold.
But did you know that you can stop paying your PMI when you no longer need it?
When you’ve built 20% equity in your home, you can cancel your private mortgage insurance. In fact, about 90% of borrowers stop paying for PMI within 60 months of purchasing their home.
Your lender and the mortgage insurer actually don’t want you to have to pay for private mortgage insurance if you no longer need it. But some people may not realize that they can cancel it when it’s no longer necessary.
Here are the steps to help you through the cancellation process.
Step 1: Determine if you can qualify for PMI cancellation. Have you paid your mortgage to 80% of the loan-to-value ratio? Have you made any remodeling improvements to your home that has increased its value? Have the homes in your neighborhood gone up in value? If you answered “yes” to any of these questions, you may be able to cancel your private mortgage insurance.
Step 2: Look on your monthly mortgage coupon or invoice for your loan servicer’s contact information and your loan number, then call them.
Step 3: Tell your servicer that you would like to cancel your private mortgage insurance and ask them for their cancellation requirements.
Step 4: Confirm the contact person’s name as well as their mailing address, email address or fax number depending upon how you’ll respond to them with their requested information.
Step 5: Complete any requirements needed by your servicer and provide additional information on your home or loan. You may need a home appraisal done, which your servicer will make the arrangements for. Or, you may need to get a comparative market analysis (CMA) or a broker’s price opinion (BPO) on the value of your home.
Step 6: Write and send a letter requesting cancellation of your PMI.
Step 7: Your servicer will notify you when your private mortgage insurance is terminated.
By cancelling your private mortgage insurance, you can save yourself money. However, if you can’t persuade your lender to stop your PMI, you may want to consider refinancing your home. Contact Grandview Lending if you’re interested in purchasing a home with private mortgage insurance or need assistance in refinancing your current loan.
We provide our clients with exceptional service and integrity which has become our hallmark.