End PMI Payments

You may be eligible to save up to a thousand dollars a year by canceling your private mortgage insurance (PMI). Similar to home or auto insurance, PMI protects against financial loss. Instead of insuring against a car accident it insures a lender against a borrower defaulting on a mortgage loan. The lender can foreclose on the property and file a claim with the mortgage insurer for some or most of the loss. Typically PMI is required for borrowers who have a down payment of less than twenty percent.

Homeowners who are typically eligible for cancellation of PMI are those with a 20% equity level (25% if your mortgage is less than five years old) and who have a good payment history. A good payment history means that all payments are current at the time of application for cancellation of PMI, no payments are more than 30 days late in the last twelve months, no more than one late-payment penalty in the last twelve months, and no notice of default recorded against the property.

Industry estimates state that anywhere from 30,000 to 50,000 borrowers throughout the U.S. could be eligible for cancellation of PMI based on capital improvements homeowners have made to their property and the high appreciation of home values in a particular area.

Homeowners looking to cancel their PMI have many helpful resources that will provide free information and some fee-based services that will research and cancel PMI for you. The best place to start is a free online service that will walk you through the calculations to determine if you are eligible to end PMI. This site also answers the most frequently asked questions about this process and explains your legal rights. The trade association for mortgage insurers, the Mortgage Insurance Companies of America (MICA), sponsors the Web page located at www.privatemi.com. In addition to the cancellation calculator, the site also offers sample letters to send to your mortgage services to begin the cancellation process.

If you are eligible for cancellation of PMI you may need a new appraisal of your home. This depends on your mortgage servicer. Some servicers won't require the appraisal, but will use broker price opinions or comparative market analysis, both of which are cheaper than an appraisal. You cannot order your own appraisal, however. Your servicer will coordinate with an approved appraiser to appraise your home.

If all of the research and footwork seems like too much work you can also hire a commercial service to take care of the whole matter for you. These types of companies should handle all correspondence, escrow account analyses and disputes with servicers. This generally costs around $500, including the appraisal. You can perform an Internet search for these types of companies with the keywords "cancel PMI."

Sources: Kenneth R. Harney, The Washington Post; Myers Internet Services, www.mortgagefaq.com; the Mortgage Insurance Companies of America (MICA)

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