Q. We bought our home in 2005 with a no-down-payment loan that required private mortgage insurance. Since then, we have worked hard to make additional principal payments and have reduced our balance to about 70 percent of the current value. The loan papers say that we can have the PMI eliminated when the loan balance is less than 78 percent of the value of the home. Based on the original amortization schedule, that wasn’t supposed to happen until 2018. Our lender is saying that the PMI must be paid until then. Can we do anything about this?
A. Yes. Typically, a lender guards itself against a default by requiring the borrower to take out private mortgage insurance if the down payment is less than 20 percent. The Homeowners Protection Act is the federal law that applies to your situation. It states that your PMI payments will stop on the date disclosed to you when you made the loan – 2018. Because you made extra payments, you can apply to have the PMI removed. But you must be current on the loan and not have a second mortgage.
The request must be made in writing. Your lender can require you to provide evidence of the value of your home, so you likely will have to get an appraisal. Most homes bought in 2005 have dropped in value, so this is most likely the loophole that your lender is using to require the continued PMI payments. If you have made your request in writing and have been denied, I recommend that you look into refinancing your home. You would not be required to pay PMI based on your current loan-to-value ratio.
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