Eliminating Private Mortgage Insurance

For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (The legal requirment does not include some higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgages closed after July 1999) at the point your equity gets to 20 percent, regardless of the original purchase price.

Keep a running total of payments

Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to be aware of the the purchase amounts of the homes that are selling around you. You are paying mostly interest if you closed your loan fewer than 5 years ago, so your principal most likely hasn't gone down much.

Proof of Equity

Once you determine you've achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. First you will let your lender know that you are asking to cancel your PMI. Then you will be asked to submit documentation that you have at least 20 percent equity. You can get documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

American Mortgage Advisers, Inc can answer questions about PMI and many others. Give us a call at 2148657442.