MILWAUKEE — If you have private mortgage insurance and are expecting your lender to remove it when you owe less, you could be faced with some challenges.
Private mortgage insurance or PMI is something that a lender will typically require you to purchase if you are borrowing more than 80 percent of the appraised value of a home or if you have some credit issues. Higher loan to value mortgages can have some increased default risks for lenders. Although the borrower pays the premium, it protects the lender, not the borrower should the loan go into default. And, although you may have purchased private mortgage insurance, your lender could still foreclose on your home if you fail to make payments.
Private mortgage insurance does not necessarily get removed when you now owe less than 80 percent of the value of your home there are a number of circumstances that can apply. For example, if you have a government issued loan such as an FHA or VA loan, rules regarding the removal of PMI do not apply. If you have been late on a payment within the past 12 to 24 months, a lender may not remove the PMI. Or, some lenders will require that you have made substantial improvements to your home before they will consider removing it.
If you think your lender is not being fair about removing PMI, here is what you can do:
Most important, before you pay for a new appraisal, check with your lender about their requirements for removing PMI. If you believe that they are not treating you fairly, file a complaint with the Consumer Financial Protection Bureau.
Or, consider refinancing with a different lender. Mortgage rates, terms, and conditions change all of the time, and in some cases, you could be further ahead by going with a different lender.