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Are you paying for Private Mortgage Insurance (PMI) you don't need?
If you financed the purchase of your home and put less than 20% down initially, the lender probably asked you to carry Private Mortgage Insurance (PMI) to protect his interests. PMI pays off your mortgage in case you can't. Unfortunately, many homeowners continue to pay for PMI long after it's required!
The Homeowner's Protection Act.
Congress recently passed The Homeowner's Protection Act which directs lenders to cancel PMI when certain criteria are met. For most conventional mortgages, there are two cancellation options.
1. The first, known as automatic cancellation, occurs when the loan-to-value (LTV) ratio reaches 78% based on the original market value of the home. This may take some time.
2. The second, called owner-initiated cancellation, occurs at 80% LTV. This option allows a lender and a borrower to agree to cancel PMI before automatic cancellation occurs at 78% LTV.
The second, "early out" option could save hundreds, perhaps thousands of dollars in unnecessary PMI payments! Under this provision, factors such as home improvements and appreciation can be taken into account when determining equity for the purposes of PMI cancellation.
Do you qualify for PMI Cancellation?
If you borrowed more than 80% of the purchase price of your home, contact your lender to determine the conditions of his early cancellation policy. If you qualify for PMI cancellation, the lender will ask you to provide a certified appraisal to determine the equity appreciation of your home.
Before you order an appraisal, ask us to provide a no-cost pre-appraisal review to determine if PMI cancellation is feasible. Why pay more than you should?
Arleen E. Goscinski, ASA, New York State Certified Real Estate Appraiser
New York City, Queens, Nassau, Suffolk New York Real Estate Appraisals
149 Ketay Drive South East Northport, NY 11731-5031