Canceling Private Mortgage Insurance

Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed past July of '99) goes below seventy-eight percent of the price of purchase, but not when the loan's equity gets to more than twenty-two percent. (There are some exceptions -like some loans considered 'high risk'.) But if your equity rises to 20% (regardless of the original purchase price), you have the legal right to cancel PMI (for a mortgage loan that past July 1999).

Do your homework

Analyze your monthly statements often. Make yourself aware of the selling prices of other homes in your immediate area. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.

The Proof is in the Appraisal

At the point you find you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. First you will let your lending institution know that you are asking to cancel PMI. Your lender will require proof that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.

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

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