What is PMI?
If you put less than 20 percent down on a home mortgage, lenders often
require you to have Private Mortgage Insurance (PMI). PMI protects the
lender if you default on the loan. The Homeowners Protection Act of 1998
- which became effective in 1999 - establishes rules for automatic
termination and borrower cancellation of PMI on home mortgages. These
protections apply to certain home mortgages signed on or after July 29,
1999 for the purchase, initial construction, or refinance of a
single-family home. These protections do not apply to government-insured
FHA or VA loans or to loans with lender-paid PMI.
If you own a loan that carries PMI you can request to cancel or auto terminate the PMI. Here are the two ways:
Cancellation by Request:
Your PMI may also be canceled at your request - with certain exceptions
- when you reach 20 percent equity in your home (based on the original
purchase price or on the appraised value of your home at the time the
loan was obtained, whichever is less), if your mortgage payments are
current. You need a good payment history, meaning that you have not
been 30 days late with your mortgage payment within a year of your
request, or 60 days late within two years. Your lender may also require
evidence that the value of the property has not declined below its
original value and that the property does not have a second mortgage,
such as a home equity loan. Lenders must terminate the coverage within
30 days of cancellation or the automatic termination date, and are not
permitted to require PMI premiums after this date.
Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.
Final Termination:
Final Termination Under the PMI Act, if your PMI has not been canceled
or otherwise terminated, coverage must be terminated when your loan
reaches the midpoint of the amortization period (if you are current on
the payments required by the terms of the mortgage). For example, on a
30-year loan with 360 monthly payments, the chronological midpoint
would occur after 180 payments. No payments or premiums may be required
from you more than 30 days after this final termination date.
Classic Realty - Fairfax, VA
No Pressure, Just Seriously Devoted to Real Estate
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