Make Private Mortgage Insurance a Thing of the Past

For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (The law does not apply to a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for loans closed after July 1999) at the point your equity rises to 20 percent, regardless of the original price of purchase.

Do your homework

Analyze your statements often. Also be aware of the price that other homes are being sold for in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or under, you probably haven't had a chance to pay very much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

At the point you find you have achieved at least 20 percent equity, you can start the process of getting PMI out of your budget. You will need to notify your mortgage lender that you wish to cancel PMI. Your lender will request documentation that your equity is high enough. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.

At ADVISORY MORTGAGE, we answer questions about PMI every day. Give us a call at 8102292820.