by caf46 » Mon Mar 23, 2009 08:54 pm
If you have bought a home with a loan more than 80% of your home's value then your lender will require you get an extra insurance i.e. the private mortgage insurance. To put it simply if you are a buyer with down payment less than 20%, you will usually be required to pay PMI.
What are the benefits of PMI?
PMI has its own benefits. Take a look:- It protects a lender from any loss that may occur due to a default in loan by a borrower.
- It enables a prospective borrower to have greater access to homeownership even if he has less cash on him.
- It allows an individual to purchase a home with as less as 3% - 5% down payment.
- You do not have to wait till you can save enough money in order to buy a house.
What are the new PMI requirements?
There is a new federal law, The Homeowner's Protection Act (HPA) of 1998 that requires revelation regarding PMI for loans. These disclosures are required of lenders against PMI for loans secured by the consumer's main residence purchased before, on or after July 29, 1999. There are also provisions for automatic termination of the Private Mortgage Insurance as well as cancellation requested by the borrower.What does The Homeowner's Protection Act (HPA) of 1998 cover?
Normally, The Homeowner's Protection Act (HPA) of 1998 is for mortgage transactions for home buyers purchasing homes after July 29, 1999. However, it also applies to the loans obtained before July 29, 1999. VA and FHA are not covered under HPA. It has different requirements for 'high-risk' loans.Is there any way you can avoid PMI?
Of course and there are more than one way. Take a look:- Paying higher interest: If you accept a higher interest rate on your mortgage loan, your lender may waive the Private Mortgage Insurance requirement. This increase in rate depends on the down payment that you pay. It generally ranges from 0.75% to 1%. This mortgage interest is tax deductible.
- Opting for an "80-10-10" loan: Basically this plan involves 2 loans and a 10% down payment. Private mortgage insurance rates equaling 80% of the sale price finances 90% of the loan amount. The remaining 10% of the sale amount is financed by a second mortgage. Ideally this 2nd mortgage has a higher rate of interest but since the loan amount is only 10% of the total amount, the combined interest paid monthly is still lower than the amount to be paid if one mortgage pays for one mortgage insurance. Moreover, the mortgage insurance is tax deductible and this is an added advantage.
How does one cancel or terminate PMI?
PMI or Private Mortgage Insurance cancellation can be made in a few simple ways. They are:- Appraisal: Your private mortgage insurance cancellation depends on the value of your home. If the value of your home has risen recently then the mortgage insurance may be terminated. The equity in your home needs to fall below 80% loan-to-value-ratio as required by your lender for it to be eligible for cancellation. Your lender will need to see a valid home appraisal before he can terminate the mortgage.
- Remodeling: If you have made certain improvements in your home, it means that you have automatically increased the market value of your home. Hence the above mentioned principal also applies here.
- Paying your mortgage: If you can manage to bring your loan-to-value-ratio below 80% then you do not need to pay the PMI. Hence, small monthly payments can make a significant amount of difference.
- Opting for an "80-10-10" loan: Refer to the section under avoiding PMI.
- Automatic cancellation: As you reach 20% equity in your mortgage you have the automatic right to request for private mortgage insurance cancellation according to The Homeowner's Protection Act (HPA) of 1998. Moreover, lenders are instructed to automatically cancel PMI as soon as the borrower reaches 78% of the loan-to-value. You may opt for a private mortgage insurance calculator to help you better with your loans.
Private mortgage insurance is a boon for such buyers who cannot afford a large 20% down payment. This is to protect your lenders, and hence you, from a default that you make on your loan. So if you are considering buying a house with a homeowner's loan, be prepared to get PMI since your lender will require you to have one.
The homeowner pays the premium but the Lender holds the policy. In the event the homeowner is foreclosed on and the PMI company pays the lender can the PMI company sue the homeowner for their lose?
Posted: Tue Jan 26, 2010 01:20 am Post Subject: PMI not canceled at 78%
"The Homeowner's Protection Act (HPA) of 1998. Moreover, lenders are instructed to automatically cancel PMI as soon as the borrower reaches 78% of the loan-to-value."
Isn't this actually when the bank has the loan scheduled to reach 78%? I have paid down my mortgage to 78% by paying extra principal and it isn't automatically coming off. I have also read others have done the same and have had to pay fees to get the PMI off. If true, this sounds like it violates the spirit of the law.
Posted: Tue Jan 26, 2010 01:54 am Post Subject:
Yeah, I think I had that backward.... you hit 80% and then after some more payments you hit 78%. You still need to meet other criteria like being up to date on the loan. This means no late payments for the prior 12 months. There are a few other requirements. Your best bet is to call your mortgage company and inquire.
Posted: Wed Feb 10, 2010 03:41 pm Post Subject: I have it but does it really pay?
I have PMI and I am currently in foreclosure. If in fact the courts decide to set the home for aution and the home sells for less than the amount of the loan is that when PMI pays the difference? Is this what the PMI is all about?
Posted: Thu Feb 11, 2010 12:18 am Post Subject: PMI Mortgage insurance
If your home sells for lower than the principal amount can a PMI claim be made to cover the difference?
Posted: Mon Feb 22, 2010 11:32 pm Post Subject: PMI removal at 78%
We have a loan with Countrywide (BOA). We just dropped to 78%. We asked that the PMi be dropped when we got to 80% of the loan and they insisted on an appraisal. We waited to drop further and are now at 78% of the original value and are also at the date set forth in our mortgage as being eligible for dropping PMI. When we contacted them again, they are again insisting on an appraisal. Do we have to do this? Can we force them to drop PMI by suing them?
Posted: Tue Feb 23, 2010 05:15 pm Post Subject: Do payments to mortage holders cease once a valid offer by a
We have had an offer on a short sale pending bank review for over 120 days. I suspect that because of an exisiting PMI policy and possibly Federal Bank discount payments if the mortgage was purchased by the primary lender, that the bank is not reviewing this as it will affect their PMI payments. This is a cash deal, so there are no mortgage requirements for the new buyer. Does the bank have to notify the PMI insurer and the fed once they receive a valid offer, or only when they formally review it. When would PMI payments to the bank cease?
Posted: Sat Mar 13, 2010 02:30 pm Post Subject: pmi
Can your PMI sue you for the difference in a forclosure.
Posted: Sat Mar 13, 2010 02:57 pm Post Subject: MI and Defaulted Mortgage
Our landlady has defaulted in her mortgage on the home we're renting from her, and the house is set to be auctioned off at the end of this month. Her boyfriend (a real estate agent) said that she has mortgage insurance to cover the losses that may incur if the house sells for less than it's worth. He said that she was paying an extra $100 per month on her mortgage for said insurance, but he also said she hasn't paid her mortgage for at least 8 months now. If she's not paying the mortgage, would her mortgage insurance be terminated for non-payment?
Posted: Sun Mar 14, 2010 03:19 am Post Subject:
Can your PMI sue you for the difference in a forclosure.
The answer is "it depends." I know, you hate that answer. The dependency can be viewed based upon the principle that the PMI company has no greater rights than your lender has. So if the underlying debt is "non-recourse," they are out of luck. On the other hand, if it is "recourse" the answer is yes.
Posted: Sun May 09, 2010 12:54 pm Post Subject: insurers
Name some of the major carriers of PMI .
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