I received a Private Mortgage Insurance Disclosure from my mortgage company the other day. It's been a while since I've mentioned how much I detest PMI so I guess I owe them some thanks for reminding me about how they're screwing me.
PMI is paid to mortgage companies to fund their foreclosure costs if you default on the loan. It's a fee levied against people who can't afford to pay 20% down on their house. Yet another fee that makes it harder for people without money to become people who have money.
If you do get your mortgage paid down to the 80% mark, you can request, in writing, to drop the PMI. It's not automatic and they don't have to honor your request.
In my case, they don't have to drop it if you've had any payments in the last 2 years that were 60 days late or any payments in the last year that were 30 days late.
Not only that but if they aren't ready to give up on the free money, they can make you get your house appraised to make sure that the house is still worth at least as much as it was when they made the loan. You have to pay the appraisel costs of course.
If I get my mortgage paid down to the 78% and am current on my payments, it's supposed to be automatically taken off.
I'm at the 97% level right now so that's a little ways off. My goal for 2008 is to get rid of the PMI and to never, ever pay it again.
PMI is a great thing for mortgage companies because the current trend is for people to move or refinance every few years. People who refinance to get the equity out of their houses will never get their mortgage paid under 80%. People who go for those interest only loans will never get their mortgage paid under 80%. These people will always be paying more money for something that they will never own. Crazy.