ORANGE COUNTY PRIVATE MORTGAGE INSURANCE
PMI, the acronym for private mortgage insurance, allows individuals to purchase their home with less than a 20% down payment. If you are paying PMI, you may not need to be. Have you ever given any thought to exactly what makes up your monthly payment? For most of us, the mortgage payment not only pays off the mortgage loan, but a portion also gets put into an escrow account to pay for real estate taxes and a variety of different types of insurance (homeowners, hazard, flood, PMI, etc.)
If you purchased your home with conventional financing and put less than 20% down, it’s likely you’re paying PMI. Private mortgage insurance protects the lender or investor against loss if a borrower stops making payments. Homeowners mistakenly pay this insurance year after year, when it’s no longer needed, and as a result, end up paying thousands in useless insurance premiums.
Here’s the good news that many homeowners don’t realize – Once you’ve reached 20% equity in your home by appreciation, improvements made to the home, or by paying down the principal balance of the mortgage (or any combination of the three), you can force the lender to cancel the private mortgage insurance. All you have to do is request in writing that the private mortgage insurance will be canceled (most lenders have a brief form that must be filled out) and provide the lender with proof of sufficient equity over 20%.
In most cases, the necessary proof is a state certified appraisal. Recent legislation (the Homeowners Protection Act) requires servicing lenders to make homeowners aware of the existence of any PMI they might be paying for and the requirements necessary to have it canceled. Fortunately, you don’t have to wait for the lender’s notification to rid yourself of PMI. If you have equity of 20% or more, you’ll be able to cancel it almost immediately.
Although mortgage insurance may have allowed you to purchase a home, there will come a time when this added monthly expense will no longer directly benefit you. Therefore, it’s in your best interest to keep the provisions surrounding its cancellation in mind because no one is going to cancel it for you and because you are, ultimately, your own financial advisor.
Most lenders require a real estate appraisal by a state certified appraiser as the primary proof required to eliminate unnecessary PMI insurance. At the CMP Appraisals, we specialize in helping people just like you rid themselves of unneeded and unwanted PMI insurance. We offer a free initial consultation and will help you to determine if you have sufficient equity in your home to enable you to cancel your PMI.