I would like to find out how to eliminate PMI (or MIP) from my current mortgage loan.
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Are You Paying Too Much?
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Today, thousands of homeowners with mortgages are paying for mortgage insurance that they more than likely no longer need to pay!
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Private mortgage insurance (or PMI) protects the lender against you defaulting on your mortgage loan. But it does not protect you in any way! Yet, you are paying for it. It is a mandatory type of insurance that your lender (rightly) required when the loan was first made, if certain lending criteria were not met by you. P.M.I. is normally required when your down payment is less than 20% of the home's appraised value at the time of 
purchase. The lender then can offer you the loan provided you pay for PMI. This then enables the lender to go ahead and make you the loan, which would otherwise be considered too risky to be purchased by their 3rd party investors who actually supply the money.
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But what about after the value of the home increases and the so called "risk" is no longer as great? In effect, if your property's value increases, you now have more than a 20% "down payment" - because your equity has now met or exceeded 20% of the home's current value, making the lender's loan position a whole lot less "risky". However, even then, the monthly charge for PMI will continue, unless you take the necessary steps to have it removed!
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The Homeowners Protection Act of 1998 provides that homeowners can ask lenders to cancel PMI coverage as soon as 20% equity in the home has been reached. Lenders frequently, if asked, allow cancellation once the difference between market value and amount still owed is at least 20%. The lender would also want verification of a good loan payment history, and a current appraisal to verify current market value. Unfortunately, at least at this time, VA and FHA loans for the most part are not eligible to drop mortgage insurance. But, you could eliminate it on these type loans by simply refinancing to a conventional loan.
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How much does this PMI amount to? Is it even worth bothering about?
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Good question. To find out how much you actually pay in PMI, check your monthly mortgage statement. It is included in your monthly mortgage payment and should be shown separately as part of the payment breakdown. Or, to get a rough estimate, use this formula: (by the way, it is less expensive for a fixed rate loan than for an adjustable rate loan):
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30 Year fixed rate loan:
          yearly PMI = (loan amount) multiplied by .0078
          monthly PMI = (yearly PMI) divided by 12
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Example loan amount:  $200,000
          yearly PMI = $200,000 X .0078 = $1,560 per year
          monthly PMI = (yearly PMI) divided by 12 = $130/ per month, approximately.
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So, as you can see, it could amount to your saving over $100/month on the typical house payment. I don't know about you, but I could sure use an extra $100 plus per month to spend on other things more exciting than mortgage insurance - especially when it isn't even necessary! If nothing 
else, you could pay an extra $100/month on your mortgage balance and thereby pay your whole loan off way ahead of time and save a bunch of interest! At least use the money to take the family out to eat somewhere nice a couple of times a month!
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How do I know if my home's value has increased enough to have my PMI removed? Well, before you even lay out any money for an appraisal, there are a couple of things you could do to see if your home is even in the ballpark as far as current value is concerned. You could ask your real estate broker to give you a quick market estimate. This is usually a no charge service that most brokers are happy to do for their customers.  It's good for future (or present) business. And, there are some appraisal companies who will give you a free estimate before charging you for an actual appraisal - just to see if you are even close to having enough value to warrant the cost of an appraisal. But in the very worst case, your main expense in doing this would be the cost of a full appraisal, which is probably going to run you $300 - $400 at the most. This is well worth the cost and if you do eliminate the PMI, you would be able to make up the cost in way less than the first year! (in the Denver area, I know of at least 1 appraisal Co. that will do a preliminary no charge assessment for you before doing their actual onsite appraisal).
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Very recently, many conventional lenders are including a provision in their PMI insured mortgages whereby the PMI automatically terminates when the loan balance reaches either 78% of its original amount, or you reach the midpoint of the life of the loan (on a 30 year loan, that's 15 years)! But why wait 12 or 15 years? In a market where home values are increasing, your home's value may very well have increased more than enough within your first 5 or 6 years!
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Attached is an actual PMI Disclosure Form that was made on one of our customer's mortgage loans dated 6/19/2002. This is shown to illustrate the actual details required in order to comply with the lenders requirements for removing PMI:
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PMI Page 1
 

PMI Page 2
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O.K. So, that's about all I can tell you about eliminating PMI. But, its a heck of a good idea - if you can do it, don't you think? Right!
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Here is a sort of checklist you can use in applying for this from your own lender: Information & Procedures You Need To Get From Your Present Lender:
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Call your lender and find out exactly what you need to do in order to qualify for having your PMI (or, if an FHA loan, your MIP) removed:
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  1. Name of Lender:
  2. Mailing Address:
  3. Phone #:
  4. Your Loan Number#:
  5. Type of Loan (conv., FHA, VA, etc.)
  6. Date of Loan:
  7. Original Amount:  $____________________
  8. Monthly Payment:
  9. Interest Rate: _____%
  10. Fixed or Adjustable Rate?:
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Questions to Ask: (Due to Federal privacy laws, most lenders will not give out this information over the phone to third parties, so that you yourself as the borrower must be the only one that can call your lender to get this information.)
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1)  What is the exact procedure and requirements I'll need to follow to apply to have my PMI or MIP eliminated from my loan? (list each thing exactly)
2)  Can you mail me an application and/or whatever papers are necessary to begin this process?
3)  Will an appraisal be required, and if so, can I use my own appraisal service, or am I required to use an appraiser chosen by the lender?
4)  Approximately how long should this entire process take?
5) Are there any other specific requirements you have for doing this?
6) Do you have a local branch office through which I can get this done, or is this the phone number I should use for contact in pursuing this process?
Note the date and time of your call, and also who you spoke with. Most lenders are very helpful and will be happy to give out this information, so 
don't be afraid to ask any question. After all, it is your loan and your money that is at stake!
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When you've gotten this information, simply follow your lenders instructions and you should be well on your way to saving some real money!!!
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Well, good luck with this and I hope you'll be able to save some money. May I suggest that you take at least the money you will save on this each month and apply it (see the link How much can I save by converting to a bi-monthly mortgage payment? ) toward reducing your loan and saving tons of interest. At least look into it, won't you?
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