Canceling Private Mortgage Insurance

For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of your purchase amount � but not at the point the borrower earns 22 percent equity. (Certain "higher risk" loan programs are excluded.) However, if your equity reaches 20% (no matter what the original purchase price was), you have the right to cancel your PMI (for a mortgage that past July 1999).

Keep track of payments

Study your loan statements often. Also be aware of the price that other homes are selling for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't greatly reduced principal � you have paid mostly interest.

The Proof is in the Appraisal

Once your equity has reached the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. First you will let your lending institution know that you are requesting to cancel your PMI. Lending institutions require proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.

At The Reen Team at American Pacific Mortgage, we answer questions about PMI every day. Call us: (408) 626-1879.

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