Eliminating Private Mortgage Insurance

For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (This legal requirment does not apply to some higher risk mortgages.) However, if your equity gets to 20% (regardless of the original purchase price), you have the legal right to cancel the PMI (for a loan closed after July 1999).

Do your homework

Review your mortgage statements often. You'll want to be aware of the the purchase amounts of the houses that are selling around you. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.

Proof of Equity

At the point you determine you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will first tell your lender that you are asking to cancel your PMI. Lenders require proof of eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.

American Mortgage Advisers, Inc can answer questions about PMI and many others. Give us a call at 2147390569.