Starting July 29, hundreds of thousands of home-owners in the US may be able to escape an onerous extra fee included in their monthly mortgage payments.
Under a new federal law, new buyers can have the premium for private mortgage insurance (PMI) removed once the equity in their home reaches 20 percent of the original loan amount. Banks are required to terminate the charge once that figure hits 22 percent.
PMI - which costs homeowners roughly $25 to $65 a month for a $100,000 loan - is charged to those who couldn't scrape together a 20 percent down payment.
A growing number of homeowners are paying this premium as the government and banks offer more mortgages that require as little as 3 percent down.
The problem is, as these buyers build up equity of more than 20 percent, the PMI payments often continue.
Banks say PMI is necessary in case you default. They assume that repossessing your house will cost them 20 percent of its value. Your 20 percent down payment, plus the value of your house ensures the bank will get its money back. PMI gives the bank the same assurance even if you put less down.
For more information or to see if you qualify to drop PMI, visit www.privatemi.comtext
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