Canceling Private Mortgage Insurance

For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls lower than 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (Some "higher risk" morgages are not included.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan closing after July '99), without considering the original purchase price, at the point the equity climbs to twenty percent.

Verify the numbers

Familiarize yourself with your monthly statements to keep a running total of principal payments. You'll want to be aware of the the purchase amounts of the homes that are selling around you. Unfortunately, if you have a recent loan - five years or under, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

As soon as your equity has risen to the desired twenty percent, you are not far away from getting rid of your PMI payments, for the life of your loan. First you will let your lending institution know that you are requesting to cancel PMI. Next, you will be asked to verify that you are eligible to cancel. You can acquire documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

The Mortgage Exchange Service LLC can answer questions about PMI and many others. Call us at 703.255-5810.

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