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How to Get Rid of PMI
Eliminate PMI and Save!
If you were unfortunate enough to not have sufficient funding for a large
down payment when you purchased your property, and you were forced to
finance eighty percent or more of the cost, you were then required to
have a PMI. PMI, private mortgage insurance, is a policy that protects
the lender if you were to default on your loan. Your costs for this could
be anywhere from ten to two hundred dollars or more, depending on the
amount of your mortgage.
If you are someone who is saddled with these payments, in many cases you
are able to get relief from this monthly burden by seeking refuge in the
Homeowner's Protection Act of 1998. Congress passed this measure so that
homeowner's, once the loan balance in their homes has passed eighty percent,
may petition the mortgage lender to remove the requirement and its cost.
If the percentage drops to seventy-eight percent the mortgage company
must automatically remove the PMI that is in place.
The only stipulation that would be in effect, that may cause you to be
denied, is if you were not consistent or up-to-date with your loan's repayment
schedule. As always, being delinquent effects your credit rating and you
will suffer for being a loan risk. If this has happened to you, you must
first restore your credit and then wait until the loan period is shortened
to half its life and then petition the lender a second time. As you can
see, good credit is of benefit to you, not only when you are seeking financing,
but throughout the life of your loan.
Arm Yourself With the Following Knowledge, Examine Your Situation
Closely and You May Be Able to Stop Making PMI Payments, and Save Yourself
Some Cash Every Month.
- As we told you in the previous section if the LTV, or loan to value
ratio, is in your favor you will qualify for the PMI relief. Homes appreciate
in value at different rates, and for different reasons, depending on
where they are located and what you may have done to improve them. In
some cases, a shortage of available homes (supply and demand) on the
market will increase the value of your property, and in other cases
it may be because the neighborhood on the whole has become a more desirable
place to live. If you were able to make improvements on your home, that
did not require further financing, you will also stand to gain from
the appreciation of the home's value.
- If your loan is for a shorter period of time, than a standard thirty-year
loan, you will be paying off your debt much faster than if it wasn't.
If that's the case, your LTV will reach the eighty-percent level much
faster than those who do not have a short amortization schedule.
- If you were able to make additional payments to your loan and bring
down the balance faster than the amortization schedule originally set
you will also have reached the eighty-percent level faster and, again,
be eligible to take advantage of the Homeowner's Protection Act