The frequency of Private Mortgage Insurance (PMI) grows as more and more people purchase homes with less than a 20 percent down payment.
In case you default on the mortgage, the lender, not you, will be covered by PMI. Reassure lenders who traditionally refused to approve mortgages with down payments of less than 20 percent are generally covered by PMI. When lenders finance more than 80 percent of a homes purchase price, the increased risk that they face will be covered by PMI.
Once you have 20 percent equity in your home, you will be allowed to request the cancellation of your PMI, according to the Homeowners Protection Act of 1998. As long as your payment record is good, you should have no problem with canceling it.
However, your mortgage holder has the option of canceling it, as well. Lenders will be required to cancel your PMI, once your equity reaches 22 percent. Fines and payment of you legal fees will be subject to the lending institution, if your policy isn't cancelled when it is supposed to.
When you close on your house that you have private mortgage insurance, you must be informed in writing. Lenders must explain PMI, and they should also deliver information about when you cancelled it. You should be notified when you can cancel your PMI on an annual basis.
If you want to know when you can cancel your policy, you can always contact your insurer. Just like canceling any policy, it is important that it is done with the necessary steps and precautions. If you cancel your policy when you're not supposed to, you might face serious legal problems or high fees.
One of the many reasons why people cancel their policies is because they believe that they pay far too much for them. Are you paying too much for your PMI? Bradley Inman, founder and CEO of HomeGain, claims "PMI becomes a burden after you've faithfully made payments over time. The secret lenders and PMI companies still don't divulge is that the lender's true risk evaporates once the gap between what's owed and what the home is worth today stretches past 20 percent. You don't need PMI anymore. More consumers should learn if price appreciation has kicked in for them so they can get PMI off their backs and out of their wallets.'
Hazy disclosure practices have left many homeowners confusing mortgage life insurance with PMI. It is very crucial to understand that PMI protects the lender, not you.
"Unfortunately, some people continue to confuse private mortgage insurance with mortgage life insurance. Private mortgage insurance puts people in homes; mortgage life insurance pays all or a portion of your mortgage in the event of your death,' according to the Mortgage Insurance Guarantee Corporation.
By: www.2insure4less.com
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