Private Mortgage Insurance

Published on 08/23/04
By Lewis J. Corcoran - Realtor-Associate - Weichert, Realtors

Private Mortgage Insurance

Have you ever heard the phrase "PMI" and wondered what it means? Private Mortgage Insurance (PMI) is insurance paid for by a homebuyer that protects the lender in case of default on the loan. Most lenders require PMI on loans of 80% or more of a home's sale price.

Under the Homeowner's Protection Act of 1998, lenders are required to notify you every year of your right to cancel your Private Mortgage Insurance.

PMI typically costs homeowners between $500 to $1,200 per year. PMI usually can be dropped when your home equity reaches 20% of the home's value--as long as you're current with your mortgage payments. Many lenders require an appraisal prior to dropping the insurance. You must contact your lender to request that PMI be dropped.

With the home value appreciation we've seen lately, you may want to keep an eye on your PMI. I'd be happy to provide you with a quick home evaluation so we can determine how much equity you've built up. That way, if you have private mortgage insurance, you can call the bank and see if you meet the criteria for dropping the policy.

Owner's Tip:

It's a good idea to know the current value of your property, not only for PMI but also for homeowner's insurance. Make sure your policy covers your home's full replacement value.

Owner's Tip:

A current price range for homes in your neighborhood is something I can provide you via email at no charge.