Make Private Mortgage Insurance a Thing of the Past

Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made after July of '99) goes below seventy-eight percent of the price of purchase, but not when the borrower's equity climbs to over twenty-two percent. (Certain "higher risk" loan programs are excluded.) However, if your equity gets to 20% (regardless of the original purchase price), you can cancel your PMI (for a mortgage that after July 1999).

Do your homework

Keep a running total of each principal payment. Make yourself aware of the purchase prices of other houses in your neighborhood. Unfortunately, if you have a new loan - five years or fewer, you likely haven't started to pay a lot of the principal: you are paying mostly interest.

The Proof is in the Appraisal

At the point you find you've achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will first tell your lender that you are requesting to cancel PMI. Then you will be required to verify that you have at least 20 percent equity. You can acquire documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

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

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