Reducing Expensive and Excessive Mortgage Cost
Have you seriously checked the amount you’re paying on your mortgage? You might want to double check it and see if you are not paying for fees you do NOT have to pay. First review your type of loan. Check if you are paying for PMI or private mortgage insurance. On some type of loans, PMI is to be collected if you did not pay a 20% down payment on your home. This is explained on the official website of the Federal Trade Commission.
Some loans do not require PMI if you have paid a 20% equity down payment. Some people thought that the collection of PMI would automatically be cancelled once the 20% of the equity is paid. This is not always the case.
U.S. Department of Housing and Urban Development explained that once 22% of the equity is paid, the mortgage servicer should cancel PMI. The homeowner can request the cancellation of the monthly PMI collection if the owner’s equity is 20% of the original worth of the house – considering as well the conditions given by the lender.
Annual disclosure is given to borrowers to inform them that they have this option based on specified criteria or conditions. Federal Housing Administration Loans on the other hand are handled differently. Loans that are acquired after the 3rd of June 2013, must have the mortgage insurance paid as long as the loan is still in effect.
One of the suggested ways out of paying the PMI insurance is to convert to a conventional loan. It may not be the best idea though since interest rates may have increased. However, for FHA loans before June 3, 2013, when the loan balance is down to 78% of the loan-to-value, the PMI can be cancelled.
Home improvements that increase the worth of you house could also help out in the cancelation of PMI payments. The annual loan disclosure should contain the necessary information and requirements for any cancelation of PMI payments. You can submit receipts acquired from construction or supplies, along with contracts or work orders, during the home improvement.
The house shall be appraised and based on after improved value and if the current principal balance is 80% or less than the value after improvement, the insurance may be dropped or cancelled.