Eliminating 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 goes lower than 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (There are some exceptions -like some "high risk' loans.) But if your equity rises to 20% (no matter what the original price was), you have the legal right to cancel PMI (for a mortgage loan closed past July 1999).

Do your homework

Familiarize yourself with your mortgage statements to keep track of principal payments. Make yourself aware of the selling prices of other homes in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or under, you likely haven't had a chance to pay a lot of the principal: you have been paying mostly interest.

Proof of Equity

When you think you have achieved at least 20 percent equity, you can start the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you wish to cancel PMI. Lending institutions request documentation verifying your eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.

Real Property Finance can help find out if you can eliminate your PMI. Give us a call at 310-379-5997.

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