DEAR BOB: I was under the impression that when I acquired 20 percent home equity, my PMI (private mortgage insurance) premium would be automatically cancelled. When I contacted my mortgage company recently, they told me I cannot cancel PMI unless I have at least 24 months of on-time mortgage payments. I mistakenly forgot to make my payment one month, paid the late fee, and have been on-time every month except that one time. How can I force my mean, nasty, hostile mortgage company to cancel my PMI? – Nate K.
DEAR NATE: The only time PMI premiums are automatically canceled occurs when you pay down the original mortgage balance by 20 percent. That usually occurs in about the 10th year of most home mortgages.
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However, many mortgage lenders will cancel PMI premiums if the mortgage is at least 24 months old, the borrower has a perfect on-time payment record, and there is at least 20 percent home equity as shown by a new appraisal paid for by the borrower.
Unfortunately, your one late payment proved very costly. I suggest you phone your lender, ask to talk with a supervisor, explain your exemplary payment record except for your one forgetful month, and beg for an exception to the lender’s harsh policy.
If that doesn’t work, you can try a successful tactic reported by several PMI borrowers. They made their loan payments on time and then sued their lenders in local Small Claims Court for refund of their PMI premiums. Of course, the lender won’t show up. After a few months of default judgments, most lenders give up and cancel the unnecessary PMI premiums.
A QUIT CLAIM DEED WON’T CANCEL MORTGAGE OBLIGATION
DEAR BOB: I stupidly co-signed a mortgage about three years ago for a dear friend to help her buy a condo. She makes all the mortgage payments. Unfortunately, sometimes she’s late with her payments, thus harming my credit record. I’ve begged her to pay on time, but she still is often tardy. I had to go on the title with her to help her get the loan. If I give her a quit claim deed, will I then be off the mortgage obligation too? – Rick H.
DEAR RICK: No. You are legally obligated to make the mortgage payments even if you quit claim your title interest in that condo. Until your friend sells the condo or refinances her mortgage without you, you will still be obligated as a mortgage co-signer.
LIVING WILL SAYS ‘PULL THE PLUG’ BUT WHAT ABOUT ALZHEIMER’S?
DEAR BOB: I am 80. My wife is 75. We both are in good health. Our living will says “pull the plug” in case of a vegetative state or catastrophic illness. But what if one of us gets Alzheimer’s or dementia? Wouldn’t it be wise for us to deed our home to our three children now rather than deplete all our assets in nursing home costs if they are needed? – Roberts P.
DEAR ROBERTS: I presume you want to retain a joint life estate in the house. If you deed your home to your adult children now, you could be creating unexpected problems. Deeding property to potential heirs before death has many drawbacks.
For example, suppose one incurs a large judgment or a divorce occurs and the ex-spouse claims an ownership interest in your house? Please consult your attorney and tax adviser to discuss your alternatives.
The new Robert Bruss special report, “Secrets of Buying Your Home or Investment Property for Nothing Down,” is now available for$4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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