Appraisals For Private Mortgage Insurance (PMI) Removal
What Is Private Mortgage Insurance (PMI)? Private Mortgage Insurance or PMI is the supplemental insurance that many lenders ask homebuyers to purchase when the amount being loaned is more than 80% of the value of the home. PMI is usually bundled into the monthly mortgage payment, and is sometimes forgotten. This is unfortunate because PMI becomes unnecessary when the remaining balance of the loan - whether through market appreciation or principal pay down - dips below this 80% level. In fact, the United States Congress passed a law in 1998 (the Homeowners Protection Act of 1998) that requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met.
When Can You Get Your PMI Cancelled? Start trying to get your PMI cancelled as soon as you suspect that your equity in your home or its value has gone up significantly. The most obvious way for equity to increase is because you’ve made a lot of mortgage payments. Your equity may also increase because your home’s value has gone up due to a rise in local home values or because you’ve remodeled. Such value-based rises in equity are harder to prove to your lender, and some lenders require you to wait a minimum time (around two years) before they will approve cancellation of PMI on this basis.
How do you get your PMI cancelled? The exact rules for canceling PMI are largely in the hands of your lender and the company from whom your lender buys mortgage insurance. Some baseline rules about cancellation were established by the federal “Homeowners' Protection Act.” This law, however, doesn’t offer consumers as much protection as its name would suggest, and it applies only to people who bought their homes after July 29, 1999.
Contact your lender to find out the appropriate PMI cancellation procedures. It is best to write a letter to your mortgage lender and formally requesting guidelines. Lenders will often require an appraisal by a state-certified appraiser as reassurance that the 20% required equity on your house has been met. For many years Cal Pacific Appraisal Company has been doing appraisals for PMI removal to the satisfaction of both lenders and homeowners. Contact us and we will be happy to review your case and provide an accurate assessment for your PMI removal needs.