Mortgage PMI Challenge

[jeffrey]

I wrote in the PS of today's challenge:

If you have not reached the 20% equity mark for your mortgage payment, but houses in your area have significantly increased in value since you purchased your home, you may want to consider getting an appraisal. The increased value of your house may put you over the 20% equity mark allowing you to cancel the PMI.

I received an email from one of the Money Saving Challenge subscribers for the challenge today on Mortgage PMI saying that:

"This is good advice, but you should advise your members that most mortgage companies want you to pay to have your home appraised first. I found this out the hard way several months ago when I requested my PMI removed. You need to make sure that you home will appraise higher or you will be out the appraisal fee."

This is true and an apraisal will probably cost a couple of hundred dollars whether you get it through your mortgage company or privately, so you want to be positive that your home will appraise above the 80% equity mark if you go this route. If it doesn't, you'll still have to pay the PMI and be out the appraisal cost.

[mom-from-missouri]

Is this the same as hazzard insurance?? If not, what is hazzard insurance??

[jeffrey]

No, these are not the same.

PMI is an insurance strictly for the mortgage company's benefit in case you default on your home loan.

Hazard insurance is insurance that covers property damage caused by fire, wind, storms, etc. Earthquakes and floods are not usually covered under hazard insurance policies and have to be added seperately.

[mom-from-missouri]

So, is the hazard insurance necessary? I also have homeowners insurance as well--am I doubling up here?

[jeffrey]

sort of...hazard insurance is part of your overall homeowners insurance...homeowners covers the house, other structures on your property, personal property, liability, etc. You have to look at your specific policy to see what is actually covered and for how much.

[Tree0164]

My mortgage company wanted $500 to come and appraise my house a year or so back.
I rather pay that $500 towards the principle and have it eventually come to 20% anyways. I am just about at that point now. We only put down 10% a few years back.