Tip of the Week: A break on PMI (7/26/99)

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	A Break on PMI Financial Tip of the Week by Deloitte & Touche OnLine July 26, 1999

A new law helps homeowners save money.

See our archive of previous tips on your money, your taxes and your financial plan.

Homeowners will soon get a break, as a new law goes into effect on private mortgage insurance.

Lenders typically require home buyers to pay for private mortgage insurance, when the buyer puts down less than 20 percent on the house.

The insurance protects the lender if the buyer defaults on the mortgage. This can cost hundreds of dollars per year. However, some lenders continue to charge the homeowner even after the owner's equity rises above 20 percent.

The Homeowners Protection Act of 1998 changes that. Lenders will now have to inform homeowners when they have 20 percent equity, and cancel the insurance at the homeowner's request. Lenders are required to stop charging for the insurance when equity reaches 22 percent.

The law only affects mortgages closed after July 29, 1999. Homeowners with older mortgages aren't protected. Still, Fannie Mae and Freddie Mac will make this police for all mortgages it holds.