Now is good time to cancel Private Mortgage Insurance, before a slowdown or even a dip in home prices makes it difficult.
Based largely on the run-up in housing values many homeowners have taken advantage of a 7 year old federal law that lasts them jettison private mortgage insurance also known as PMI.
But the laggards among those still paying PMI, which can add $100 or more to the monthly house payments, had better get on the stick. A Slowdown in appreciation or perhaps even a decline in house prices, could preclude dumping PMI for several more years. Do it now.
Private morrgage insurance is a necessary evil for many first time home buyers. Nearly 12 million families nationwide in the last 12 months alone were unable to scrape together 20% down payment that lenders traditional require. So lenders, accept the insurance as substitute for the part of the down payment that is missing.
The less money the borrower puts down, the more expesive the coverage, even though the borrower pays the premium the insurance protects the lender in case of default on the loan.
The good news is that the coverage can be terminated, a fact that has not been lost on some borrowers. Through the first eight months of this year, appraisals has ordered more than 10,000 appraisals on behalf of borrowers waiting to end coverage. That's a 110% increase over the same period a year ago.
Under the Homeowner Protection Act of 1998, lenders must cancel private mortgage insurance at the borrowers request when a mortgage is paid down to 80% of the properties original value. Policies must be terminated when the loan balance reaches 78% of the homes value at the time it was purchase.
Coverage can't be canceled until the loan is at least 2 years old unless the owner has made significant improvements to the property.