Removing private mortgage insurance

from http://www.bankrate.com/brm/green/mtg/basics7-3a.asp?caret=37

If you secured a home loan with less than a 20 percent down payment, chances are your lender required you to buy mortgage insurance to cover its exposure in case you default. Once your equity position in the home reaches 20 percent, however, you will want to stop paying mortgage insurance (unless you have an FHA-insured loan, which requires premium payments to the government for the life of the loan). Know your rights By law, your lender must tell you at closing how many years and months it will take you to pay down your loan sufficiently to cancel mortgage insurance. Most home buyers ask that mortgage insurance be canceled once they pay their loan balance down to 80 percent of their home's original appraised value. When their balances drop to 78 percent, their mortgage servicer is required to cancel mortgage insurance for them. Mortgage servicers also must give borrowers an annual statement that shows who to call for information about canceling mortgage insurance. The law does allow lenders to require mortgage insurance of a high-risk borrower until the balance shrinks to 50 percent of the home's value. You may fall into this high-risk category if you have missed mortgage payments, so make sure your payments are up to date before asking your lender to drop mortgage insurance. Lenders may require a higher equity percentage if the property has been converted to rental use. Calculate the equity in your home • Equity = Value - Mortgage balance • Percent of Equity = Equity / Value Example: If you estimate (or, better yet, if you have it appraised) that the home is worth $200,000, and you owe $150,000 on the mortgage, your equity is $50,000 (the $200,000 value minus the $150,000 mortgage balance). You have 25 percent equity in the home (the $50,000 equity divided by $200,000 equals 0.25, or 25 percent). With equity of 20 percent or greater, you have a good case to rid yourself of mortgage insurance. If you can't persuade your lender to drop mortgage insurance, consider refinancing. If your home value has increased enough, the new lender won't require mortgage insurance. Make sure, however, that your refinance costs don't exceed the money you save by eliminating mortgage insurance.

-- Posted: May 1, 2006

How do I initiate the Private Mortgage Insurance removal process?

Unfortunately, mortgage companies have varying procedures for PMI removal. Your first stop should be to call your mortgage company and ask them to mail you information regarding their requirements for the removal of Private Mortgage Insurance. The document you receive will usually give you step by step instructions.

The most critical element to PMI removal will be an appraisal of your residence by a qualified licensed or certified real estate appraiser. The appraisal will then be submitted to your mortgage company to prove that you have exceeded 20% equity in the property.

What will an appraisal cost?

The residential appraisal fee for PMI Removal is $300 for homes under $300,000 and $375 for homes from $300,000 up to $500,000.