PMI or Private Mortgage Insurance, protects lenders against certain risks when borrowers default. Charges for PMI are added to your loan payments. If is not the same as property or casualty insurance, such as a homeowners, floor or wind insurance – which protects you against damage to your property. PMI protects only the lender. Cancellation or termination of PMI does not affect any obligations you may have to maintain other types of insurance.
For loans closed Before July 29, 1999 – under certain circumstances you may be able to cancel PMI. You need to call your lender for guidelines or follow state law.
If your loan closed after July 29, 1999, you have the right to cancel PMI when:
- The date the principal balance of y our loan is first scheduled to reach 80% of the original value of the property; or
- The date the principal balance actually reaches 80% of the original value of the property. Original value means at origination of your loan, the lesser of appraised value or sales price.
In these cases, PMI can only be cancelled by calling your lender, making a written requests and having them coordinate an appraisal.
If your loan closed on or after July 29, 1999, PMI will also automatically terminate if your are current on your loan payments and on the earlier of (1) the date the principal balance of your loan is scheduled to reach 78% of the original value or (2) in accordance with investor guidelines.
PMI automatic termination does not apply to mortgages secured by two to four unit principal residences or investment properties.
For more information, call to speak to real estate attorney Jacqueline Salcines, PA, today. She holds a dual degree in both accounting and law and can provide both tax and legal advice. The first consultation is always free of charge. Or email attorney Jacqueline Salcines directly your real estate question at J.Salcines@salcineslaw.com