Private Mortgage Insurance
Congress has passed a new law requiring lenders to eventually cancel PMI or private mortgage insurance, automatically to buyers who have put down less than 20% on their home.. Youve always been able to ask your lender to drop PMI, either because your payments have raised equity to the 20% mark or your homes value has risen. The legislation requires lenders to cancel PMI automatically when your equity reaches 22% (based on regularly scheduled monthly payments) That may take nearly ten years with a 10% down and about 12 years with 5% down. Even with the highest risk, slowest paying home owner, however, PMI will be automatically dropped half way through the loan term. Thats after 15 years payment on a 30 year loan. Starting with mortgages taken out mid 1999, lenders are required to send to current customers annual notices of their cancellation rights.
Resource: Kiplingers Managing Money - Oct. 1998
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