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Canceling private mortgage insurance (PMI) (general)

by AC @, Sunday, March 27, 2016, 10:33

Canceling private mortgage insurance (PMI)

Homeowners who cannot put down at least 20 percent of the total cost of a home mortgage are typically required to purchase private mortgage insurance (PMI). At closing, the homeowner may be required to make a PMI payment of 1.75 percent of the total loan, with 0.85 percent of the total charged in the monthly mortgage payment. The rationale behind PMI is that it protects lenders against default on an FHA mortgage. But in practicality, it can add a $100-$200 per month on payments.

The Homeowner's Protection Act (HPA) of 1998 requires the lender to cancel PMI when the owner has paid down the balance to 78 percent. However, owners have the right to request cancelation of PMI when they reach 20 percent equity in the home. In other words, it's up to the consumer to take action to cancel mortgage insurance and save on payments as soon as possible. But they must meet certain conditions.


Canceling private mortgage insurance (PMI)


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