The Homeowners Protection Act (HPA) of

1998 establishes rules for automatic

termination and borrower cancellation of

PMI. For home mortgages signed on or after

July 29, 1999, the PMI must be terminated

automatically. The following conditions apply:

1. There must be 22% or more equity in the

property based on the original property value.

2. The mortgage payments must be current.

Cancellation will not occur if the mortgage is:

• High risk

• not current within the year prior to the

time for termination or cancellation.

Having a lien against the house will also

prevent cancellation of the PMI.

If you have reached 20% equity in your

house, based on the original property value,

you can ask the lender to cancel the PMI.

However, the HPA cannot force the lender to

grant your request. The lender might be able

to get you a lower monthly payment,

considering that you are so close to 22%.

Under HPA, if your PMI has not been

canceled or terminated, coverage must be

removed when the loan reaches the

midpoint of the amortization period. On a 30

year loan with 360 monthly payments, the

midpoint would occur after the 180th

payment. Final termination will occur within

30 days of this date.

Depending on the size of the mortgage, and

the risk involved your PMI premium could be

$60 a month or more. This represents $720

which you could use to pay down the

principal or put to some other good use.

Refinancing, in many instances will change

the equity in your house. Ask your lender if it

is a requirement for your mortgage. Also ask

that more than one quote be provided for PMI.

Check your escrow account to see how

much you are paying for PMI. Typically, the

rate is about $60 per month per $100,000 of

the loan amount. It could be as high as

$1,600 on a $200,000 loan. If you would like

to have the PMI canceled call your lender

and ask how to have the PMI terminated.

In some situations, the lender will insure the

loan. His cost is passed on to the borrower

through the rate he charges. Usually, the

borrower is not aware of the insurance.