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: Mon May 10, 2010 03:19 pm Post Subject: PMI Refund?
We purchased our home back in 2006. The value of the house is over $600K, we bought it for $300K (family deal :) )....so, the value has always way exceeded the amount of the loan. With that said, we should never have been paying a PMI, which we have for almost 4 years. Do you think the bank would refund the monies we already paid, when, in fact, we never should have paid it?
Posted: Fri Sep 03, 2010 01:47 am Post Subject: PMI Insurance
I have PMI insurance on my loan. At the time I took out the loan I was told after one year I could request that it be removed. When I did the lender said I had to pay down to 80% and pay on the loan for two years. After two years I requested again that the PMI be removed. I was told that I needed an appraisal. I asked about the "automatic" removal and they indicated I had to be at 78%. I asked if I made a principal payment to bring it down would I qualify for "automatic" and they said yes. I paid down to 77% but PMI kept coming. When I inquired they said that I had to make a request in writing, which I did. Their replay is now that I have to pay on the loan for 5 years, pay down to 75% LTV and also have an appraisal. I don't believe that they are in compliance with the law but they don't seem to care. Do I have any recourse?
Posted: Fri Sep 03, 2010 03:27 am Post Subject:
Answered your identical question posted as a new thread. See that for my answer.
Posted: Sat Nov 06, 2010 12:26 pm Post Subject: PMI
JUST HAD A HEART ATTACK 12 MONTH AGO,MY INCOME WAS CUT IN HALF,MY WIFE LOST HER JOB 2 YEARS AGO,WE KEPT MTG MAYMENTS UP TO DATE FROM OUR SAVING ACCOUNT, WE CAN NO LONGER AFFORD TO PAY MTG,WE ARE UPSIDE DOWN ON THE HOUSE WE OWE MORE THAN MARKET VALUE OR APPRAISED VALUE, WE HAVE PMI HOW DOES IT WORK NOW WHEN WE STOP FUTURE PMTS, AND THE PAYMENTS WE MADE LAST YEAR CAN WE CLAIM ANY OF IT,??
THANKS AND REGARDS
Posted: Wed Jan 05, 2011 01:54 pm Post Subject: Private mortgage Insurance
My question is two part, Included in my mortgage payment is the premium for Private mortgage insurance that I pay to my Mortgage company to insure the lender, who is the insurance company? #2 If I am paying for private mortgage insurance to protect the lender and I defaulf and the Bank or Lender gets back my property why then do they not get paid from the private mortgage company rather than a bail out from the Goverment?
Posted: Wed Jan 26, 2011 01:16 am Post Subject: 1st mortgage
after 1 month default (yet replaced with a certified check), my 1st mortgage returned my check and put me into legal action and sent me a letter of "notice of mortgage under charge" power of sale.
can they do that even it is only 1 month default? what is my right against private lenders who takes advantage of us.
Posted: Wed Jan 26, 2011 06:30 am Post Subject:
Something is definitely wrong here. This should not be happening. Unfortunately, this is not an insurance issue, so there is no special guidance we can offer. You need to speak to a REAL ESTATE attorney specialist ASAP!!
Posted: Sun Mar 20, 2011 05:42 pm Post Subject: Deed in lieu and PMI
I have just been granted a deed in lieu by my lender. I soon will need to sign the docs and move out. I am quite sure that I never paid PMI, although I put down 5% at closing. Does the lender have a mortgage insurance policy on the property, and can that company now sue me?
Posted: Thu Apr 07, 2011 05:34 am Post Subject:
what are the requirements of setting up private mortgage insurance company? :D
Posted: Fri Apr 08, 2011 07:01 am Post Subject: PMI
This thread is over 2 years old. What changes have been made to PMI requirements by the current year (2011)?
Add your comment