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Dear Dr. Don,
I have hit 78 percent equity on my 30-year fixed
loan that I have been prepaying. I am currently
about seven months ahead. CitiMortgage has refused
to remove the PMI stating that they are not required
to remove this without a reappraisal until the
loan was originally scheduled to reach 78 percent.
What are my options? What makes this particularly annoying is I could have had the appraisal
done a year ago when home values were higher, but at the time they said they would remove it when I hit 78
percent. Now, one year and over $300 in PMI premiums later, they changed their story. Do you have any suggestions
on how to remove this without the appraisal?
-- Rich Reconnaissance
Dear Rich,
The Homeowners Equity Protection Act of 1998 established
rules for the automatic termination of private
mortgage insurance, or PMI, on home mortgages
closed on or after July 29, 1999. The act does
not cover the government insurance on FHA or VA
loans, or loans with lender-paid mortgage insurance.
Mandatory cancellation requires
a loan-to-value of 78 percent, based on the original
property value at closing. The FTC Facts for Consumers
guide, "Cancellation of Private Mortgage
Insurance: Federal Law May Save You Hundreds of
Dollars Each Year" explains this route to
canceling PMI:
For home mortgages signed on or after July 29, 1999, your PMI must -- with certain exceptions --
be terminated automatically when you reach 22 percent equity in your home based on the original property value, if
your mortgage payments are current.
The FTC also notes that your PMI also can be canceled upon your request (with certain exceptions)
when you reach 20 percent equity in your home based on the original property value, so long as your mortgage payments
are current.
If you've reached 78 percent loan-to-value based on the original price of the home at closing
and your repayment of principal, Citi should be required to terminate your PMI policy -- unless a poor
payment history allows them to keep it in force.
If you're counting on an increase in the home's appraised value in justifying the elimination
of PMI, then you won't be able to avoid paying for an appraisal to qualify. The Bankrate work sheet
"9 steps
to cancel PMI" explains the process.
I don't understand your comment about being seven months ahead. Making additional principal
payments on the loan isn't the same thing as making loan payments early.
Review your loan balance and payment history to see where things stand. Bankrate's
Mortgage payment calculator amortization schedule can
help you understand your current loan balance.
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