Make Private Mortgage Insurance a Thing of the Past

Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of '99) reaches less than seventy-eight percent of the price of purchase, but not at the time the borrower's equity climbs to twenty-two percent or more. (A number of "higher risk" morgages are not included.) However, you can actually cancel PMI yourself (for mortgage loans made after July 1999) at the point your equity reaches 20 percent, without consideration of the original price of purchase.

Do your homework

Review your loan statements often. Find out the purchase prices of other houses in your neighborhood. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't gone down much.

The Proof is in the Appraisal

At the point you find you have reached 20 percent equity, you can start the process of getting PMI out of your budget. You will need to contact the lender to let them know that you wish to cancel PMI payments. Lending institutions ask for paperwork verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and most lending institutions request one before they'll cancel PMI.

At Southwest Funding #841, we answer questions about PMI every day. Call us: (512) 291-6100.

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