Some Insurance Unnecessary

It would be foolish to pay for insurance on a car you no longer own, right? Well, many homeowners are doing something akin to that by paying for mortgage insurance they no longer need.

“There are probably tens of thousands of homeowners out there who have reached the point where their private mortgage insurance can be canceled,” said David I. Ginsburg, president of Loantech, a financial consulting and publishing company. “And most people never even give it a second thought.”

Private mortgage insurance protects lenders if borrowers default. Lenders typically require borrowers to buy the insurance if their down payment is less than 20 percent of the home’s purchase price.

The insurance premiums are added to mortgage payments.

The biggest problem with the insurance, consumer advocates say, is that many homeowners keep paying for the insurance long after they have built up more than 20 percent equity in their homes and may no longer need the coverage. Many lenders don’t tell the homeowner, and there is no law requiring such disclosure.