Make Private Mortgage Insurance a Thing of the Past

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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 past July of that year) goes under seventy-eight percent of the price of purchase, but not at the time the borrower's equity climbs to twenty-two percent or higher. (Some "higher risk" mortgages are excluded.) The good news is that you can cancel your PMI yourself (for your loan closing after July '99), no matter the original purchase price, after the equity rises to twenty percent.

Do your homework

Keep track of each principal payment. You'll want to stay aware of the prices of the houses that are selling around you. Unfortunately, if you have a new mortgage loan - five years or fewer, you probably haven't started to pay much of the principal: you have been paying mostly interest.

Proof of Equity

At the point you find you have reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will need to contact your lending institution to alert them that you want to cancel PMI. Lenders require documentation verifying your eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

First Equity can answer questions about PMI and many others.