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CHAPTER XIV -- MANAGING YOUR MORTGAGE

LESSON 28: REMOVING PMI

Most borrowers who put less than 20 percent of the purchase price of their homes down at closing have to pay private mortgage insurance, or PMI. We already talked about how this coverage works in Lesson 8. Now, we'll talk about how to get rid of it. See Tip 1

Never allow PMI to be a permanent fixture on your mortgage payment unless you have an FHA loan, which requires premium payments to the government for the whole loan term. In the past, lenders in most states were under no obligation to tell borrowers when their loans reached the point where PMI was no longer required. Many customers ended up paying premiums unnecessarily for years as a result. But federal legislation passed in the late 1990s changed all that.

Borrowers must now be told at closing how many years and months it will take before their loans are paid down enough that they can cancel PMI. Most people can ask that PMI be canceled once they pay their loan balances down to 80 percent of their homes' original appraised values. When their balances drop to 78 percent, their mortgage servicers are required to cancel PMI for them. Mortgage servicers have to give borrowers a statement each year that shows who they can call for information about canceling PMI too.

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WarningThe PMI law does allow lenders to continue requiring so-called high-risk borrowers to pay PMI until their balances shrink to 50 percent loan-to-value ratios. Homeowners may fall into this category if they have missed mortgage payments.

Make sure your loan is up to date before making the formal written inquiry to your lender. The lender will consider your payment history when deciding whether to drop PMI.

Customers who want to get rid of PMI even sooner can take matters into their own hands. Some lenders will consider new appraisals or other methods of valuing properties -- as opposed to the original sale prices or appraised values of their borrowers' homes -- when deciding if their customers have met the 80 percent and 78 percent LTV tests, for example. See Tip 2

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TABLE OF CONTENTS

CHAPTER I
  Lesson 1
  Quiz

CHAPTER II
  Lesson 2
  Quiz

CHAPTER III
  Lesson 3
  Lesson 4
  Lesson 5
  Quiz

CHAPTER IV
  Lesson 6
  Lesson 7
  Quiz

CHAPTER V
  Lesson 8
  Lesson 9
  Quiz

CHAPTER VI
  Lesson 10
  Lesson 11
  Quiz

CHAPTER VII
  Lesson 12
  Lesson 13
  Lesson 14
  Quiz

CHAPTER VIII
  Lesson 15
  Lesson 16
  Lesson 17
  Lesson 18
  Quiz

CHAPTER IX
  Lesson 19
  Quiz

CHAPTER X
  Lesson 20
  Quiz

CHAPTER XI
  Lesson 21
  Quiz

CHAPTER XII
  Lesson 22
  Lesson 23
  Lesson 24
  Quiz

CHAPTER XIII
  Lesson 25
  Lesson 26
  Lesson 27
  Quiz

CHAPTER XIV
  Lesson 28
  Lesson 29
  Lesson 30
  Quiz

Definitions





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Lower your PMI now!

 
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