If you have private mortgage insurance (PMI) on your home loan then you are likely very anxious to have it removed. Fortunately, you are one of the lucky ones. Many people go several years without knowing that their mortgage payment contains PMI. If you have PMI on a primary residence (homestead) then for the first time starting January 1, 2007 this insurance was, under certain circumstances, tax deductible.
PMI protects a lender and others against financial loss in the event a borrower defaults on their loan. Simply, PMI is insurance you pay to protect your lender from you. Premiums for this insurance are typically included in the monthly mortgage payment. Under certain circumstances, federal law (HUD) may permit early cancellation of PMI or require that PMI automatically be terminated.
Cancellation or termination of PMI will very likely reduce your monthly mortgage payment and/or entitle you to a refund of unearned premiums.
BORROWER REQUESTED CANCELLATION OF PMI: You have the right to request PMI cancellation on or after either of these dates:
1) the date the principal balance of your loan is first scheduled to reach 80% of the original value of the property; or
2) the date the principal balance actually reaches 80% of the original value of the property.
For a purchase transactions, original value is the lesser of the sales price or original appraised value. On refinance transactions, original value is based on the appraised value.
These requirements can vary slightly by lender, but when you reach one of the aforementioned dates, PMI will be cancelled when the following conditions are met:
∙ A satisfactory payment history is required. Your loan must be current with no payments received 30 or more days late in the past 12 months and no payments 60 or more days late in the 13-24 month period preceding your request.
∙ If requested, a recertification of value may be needed. This typically involves the services of a residential appraisal company. This company will be selected by the lender and any cost associated will not be reimbursed by the lender.
AUTOMATIC TERMINATION OF PMI: If your loan is current, PMI will automatically terminate on the earlier of:
(1) the date the principal balance of
the loan is first scheduled to reach 78% of the original value of the property; or
(2) the first day of the month immediately following the date that is amortized midpoint of your loan. If your loan is not current when the termination date is reached, PMI will terminate once your loan becomes current.
The provisions for automatic termination of PMI are only effective for mortgages issued after July 29, 1999. If you have a mortgage that was issued prior to July 29, 1999 then please contact your loan servicing company for more information on how to cancel or terminate PMI.
Your request to remove PMI should be in writing. Contact your lender for the postal address for these requests. Federal law requires your lender to respond within 20 business days of receipt of your requests, and they must resolve your request within 60 business days by correcting the account or giving you a statement for the reasons why PMI will not be cancelled or terminated.
For further information about PMI cancellation or termination please visit the U.S. Department of Housing and Urban Development at www.hud.gov, call the Texas Department of Insurance consumer Helpline at 1-800-252-3439, or call us at 877-ASK-ZEUS.
Comments