What you should know about the market…
Homeowners wanting to pay off their mortgage earlier than planned can do so by making extra principal payments. One extra full principal and interest payment a year will reduce a 30-year loan to about 17 years, and adding the following month’s principal payment to the current one will cut the loan almost in half. It is important that borrowers tell their lender the extra money is to be credited to principal. Homeowners should keep records of their payments and review it once a year to be certain the lender has followed directions.
Private mortgage insurance (PMI) generally is required for home buyers whose down payment is less than 20 percent. PMI is added to the mortgage payment each month to protect the lender should the borrower default. By law, PMI must be canceled automatically when the loan balance reaches 78 percent of the home’s original value. However, some lenders are allowing borrowers to cancel this coverage when the balance declines to 80 percent of the current value, as long as the loan is at least five years old. Borrowers who have made their payments on time each month for five years should contact their lender or loan servicer to obtain all the details on cancelling the coverage.