Goodbye, PMI!

Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed after July of that year) reaches less than seventy-eight percent of the purchase price, but not at the point the borrower's equity gets to more than twenty-two percent. (This law does not apply to a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing past July '99), no matter the original purchase price, at the point the equity rises to twenty percent.

Do your homework

Analyze your mortgage statements often. Also be aware of what other homes are selling for in your neighborhood. If your loan is fewer than five years old, probably you haven't made much progress with the principal � you have paid mostly interest.

The Proof is in the Appraisal

At the point your equity has risen to the desired twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. First you will tell your lender that you are requesting to cancel PMI. Your lender will require proof that your equity is at 20 percent or above. You can acquire proof 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.

At The Mortgage Exchange Service LLC, we answer questions about PMI every day. Call us: 703.255-5810.

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