Private mortgage insurance, also called PMI, is required when a home buyer makes a deposit of less than 20% of the home purchase price. It protects the lender, not you, if you default on the loan. Private mortgage insurance usually runs 0.5% of the total loan value. On a $300,000 loan, that’s $15,000 over the life of the loan or $500 a year on a 30-year mortgage.

Instructions :

Step 1 Realize that if you are making a home purchase with less than a 20% deposit, you are responsible for paying private mortgage insurance premiums until the time that you’ve paid down your mortgage enough to build 20% equity in your home.

Step 2 Understand your rights under the Homeowners Protection Act of 1998, which allows you to request that your lender cancel the PMI payments as soon as the mortgage loan to home value ratio reaches 80%.

Step 3 Know the principal amount you must pay to attain 20% equity in your property. Ask your lender for an amortization schedule that shows each monthly payment for the life of the loan and circle the date that you will, assuming all payments are made on time, have attained 20% equity in your property.

Step 4 Make all your mortgage loan payments on time for at least a year prior to asking your lender to cancel your private mortgage insurance payments.

Step 5 Contact your lender in writing to request that the company stop charging you for private mortgage insurance. If your PMI payments are paid into an escrow account as part of your mortgage payment, you may be eligible for a refund. Make sure your letter includes the full name and signatures of all borrowers, the date, the loan number, and a clear and specific request to halt the private mortgage insurance and issue a refund of any escrowed PMI overpayments.