Eliminating Private Mortgage Insurance

For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of the purchase amount � but not at the point the loan reaches 22 percent equity. (This law does not include a number of higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgages closed past July 1999) when your equity gets to 20 percent, regardless of the original purchase price.

Verify the numbers

Analyze your loan statements often. You'll want to be aware of the the purchase prices of the houses that are selling around you. Unfortunately, if yours is a recent mortgage - five years or under, you likely haven't begun to pay very much of the principal: you are paying mostly interest.

Proof of Equity

Once 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 lender know that you are requesting to cancel your PMI. Lenders ask for paperwork verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably request one before they'll cancel PMI.

At Real Property Finance, we answer questions about PMI every day. Call us at 310-379-5997.

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