Homeowner’s Protection Act
Those who purchased their homes with a down payment of less than 20% are most likely paying for costly private mortgage insurance (PMI) coverage. This insurance is designed to protect the lender in the event of a default, and it is typically required for mortgages with a low down payment percentage.
The key thing for homeowners to know about private mortgage insurance (PMI) is that as equity is built up in the home the insurance becomes unnecessary, and it can be safely dropped. Many homeowners, however, continue to pay their PMI premiums years after they have ceased to be required.
Passed in 1998, the Homeowner’s Protection Act requires that lenders automatically cancel PMI policies after the homeowner has built up equity of at least 22%. Those homeowners whose mortgages were taken out before the passage of the law are still protected by this mandatory notification requirement. In addition, the law gives homeowners the right to initiate PMI cancellation on their own as soon as their equity in the home reaches 20%.
It is important, therefore, for every homeowner to carefully track the equity that has been built up in the home, and to take action to cancel costly PMI as early as possible. In order to initiate the cancellation of PMI, the homeowner should send a written request, mailed by certified, return receipt requested mail, along with a copy o fthe appraisal of the home.
For those homeowners who are paying PMI unnecessarily, stopping the PMI payments can amount to a savings of hundreds of dollars per year. It is important to save money wherever you can, and dropping PMI insurance is one great way to do it.
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- Why No Equity Mortgage Loans Can Be Dangerous
- Reverse Mortgages and Their Differences
- Refinancing Your home the Right Way
- Re-Financing with Shorter Loan Terms
- Re-Financing with a Line of Credit Loan
- What Is a Cash Out Re-Finance?
- Is a Home Equity Loan Right for Me?
- Re-Financing with Bad Credit
- Be Careful When Pulling Cash Out of Your Home