Each month, Ken and I dip into our mailbag to help us decide what to write about in the upcoming issue. We know it's not easy to get straight answers to your tough questions. Ken and I are in the business of giving it to you straight, and this month we're tackling some of your toughest questions.
We'll show you how to pay less money on your mortgage. We know lenders need protection from loan defaults.
But here's the rub that really ticks us off...mortgage companies don't automatically drop the PMI charge once you've built up 20% or more equity in your home. Thanks for nothing! What will stop the PMI payment if the mortgage company won't tell you: Three things:
- You finally pay your mortgage off! (Oh, the wasted PMI payments!)
- You refinance your mortgage (probably still wasting years of PMI payments), or
- Our personal favorite: You figure out when you've got the minimum 20% equity built up in your home, and you tell your insurance company to stop requiring you to put money in your escrow account for PMI premiums. Demand, in writing, a clear explanation of the insurance company's/lender's policy relating to PMI, such as when and if PMI charges may be dropped. In the end, you'll want a refinancing package that locks in a lower interest rate and drops your private mortgage insurance coverage.
The American Homeowners Association (AHA)® has a great pamphlet, "The Homeowner's Guide to Discontinuing PMI Payments" ($5) if you'd like more help negotiating with your lender. Call 800/548-8282 or write: PMI Guide, AHA, 1100 Summer St., Stamford, CT 06905.