Goodbye, PMI!

For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) However, you have the right to cancel PMI yourself (for mortgages made past July 1999) once your equity reaches 20 percent, without consideration of the original purchase price.

Verify the numbers

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

Proof of Equity

When you find you have reached 20 percent equity in your home, you can begin the process of getting PMI out of your budget. Contact your mortgage lender to ask for cancellation of your Private Mortgage Insurance. The lending institution will require documentation that your equity is high enough. You can get proof 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.

The Reen Team at American Pacific Mortgage can answer questions about PMI and many others. Call us: (408) 626-1879.

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