Chris Salese

Each year, millions of people try to make good on their New Year’s resolutions and it’s probably no surprise that physical fitness always seems to be top on the list.

For some, it could be as simple as walking more each day. But for others, it could be as complex as exercising enough to better regulate your BMI (body mass index).

If you are a homeowner with PMI (private mortgage insurance), then you should look to monitor that as well.

Although there’s really not a direct correlation between BMI and PMI, besides a few letters, it’s certainly worth watching both of them in 2017.

As I’ve covered in previous columns, the housing industry is incredibly fortunate to have private mortgage insurance companies who are willing to offer innovative products at inexpensive premiums that allow consumers different ways to finance a home with lower down-payment options.

Without these insurance programs, we would have an even uglier home affordability crisis throughout many parts of our country.

But just as it’s important for lenders to responsibly leverage these insurance certificates during your loan approval process, it’s equally vital for homeowners to understand how to eventually get rid of them.

Whether you are a first-time homebuyer or a seasoned homeowner, if you have some form of PMI now, you should contact your lender to see what type of removal options are available to you.

For example, if you were unable to take advantage of last summer’s historically low interest rates and refinance your home, then you still could be eligible for PMI removal despite not doing such with a new lower rate, too.

However, depending on your situation, today’s rates might be equally sufficient.

To help remove your PMI, the Homeowners Protection Act of 1998 was established.

It states “if the borrower is current on the loan, the requirement for PMI must automatically be terminated for residential mortgages on the termination date.”

It defines the termination date as the date the principal balance of your mortgage is first scheduled to reach 78 percent of the original value of the property securing the loan (irrespective of the outstanding balance for that mortgage on that date).

The CFPB has confirmed that if these conditions are met, automatic termination of PMI is required even if the current value of your property has declined below the original value.

Another removal option is called “borrower-requested cancellation.”

You may initiate cancellation of your PMI by submitting a written request to your loan servicer. If you meet certain requirements, your PMI shall be cancelled on the “cancellation date.”

The act defines cancellation date as either the date on which the principal balance of your mortgage is first scheduled to reach 80 percent of the “original value” of the property (regardless of the outstanding balance) or the date on which the principal balance of your mortgage reaches 80 percent of the original value of the property based on actual payments.

If this sounds complicated, please contact your mortgage professional for assistance.

Chris Salese can be reached at chris@delsurmortgage.com or 707-363-4439.

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