Private Mortgage Insurance is required when you secure a home loan with less than 20 percent down payment. For example, you are purchasing a home at a sales price of $200,000.00 and you are giving a down payment of less than $40,000, which is 20% of $200,000. Which means, you need a loan of more than 80% of the $200,000.00
The lender will consider this a risk because you are not giving a considerable amount of money down, and therefore places a special insurance to cover the risk if the mortgage falls into default. This is called private mortgage insurance or (PMI).
PMI while mandatory on these loans, it can be cancelled. Once the equity in your home reaches 20 percent or more, you can cancel it. However, the banks are strict about their procedure to cancel it.
By law, the lender must let a borrower know, based on your amortization schedule, how many months and years it will take to pay down the loan in order to be eligible to cancel the PMI. When the balance drops to 78 percent, the mortgage servicer is required to cancel the mortgage insurance. Mortgage servicers must also provide borrowers with annuals statements that alerts borrowers on how to cancel the PMI.
Cancelling the PMI requires obtaining an appraisal with a lender approved appraiser. And once the appraisal is returned, confirming that the equity of 20% or more exists.
You can also cancel PMI by making additional principal payments throughout the year in order to reduce the outstanding principal. Even a $100.00 additional payment of principal a month or year can dramatically decrease the balance.
When you are ready to buy, contact us. At the Law Offices of Jacqueline Salcines, P.A. we represent buyers both with fixing their credit to make sure they get the best possible program and rate, as well as with contract preparation and closing services.
Acting as both real estate attorney and title agent, we represent the buyers in their real estate transactions and work closely with your lender to make sure you are given the best possible mortgage rate, terms and at the lowest costs.
Attorney Jacqueline Salcines, Esq. personally handles all her own closings and is at the closing table with you to personally explain all documents required at closing.
The Law Offices of Jacqueline Salcines, P.A. is a full service real estate law firm offering real estate, title, mortgage and escrow services.
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