Goodbye, PMI!

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Although lending institutions have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance dips below 78% of the price of purchase, they do not have to take similar action if the borrower's equity is over 22%. (This law does not apply to certain higher risk mortgages.) The good news is that you can request cancellation of your PMI yourself (for your mortgage loan closing past July '99), regardless of the original purchase price, once your equity reaches twenty percent.

Verify the numbers

Keep a running total of each principal payment. You'll want to stay aware of the prices of the houses that sell around you. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't been able to pay a lot of the principal: you have been paying mostly interest.

Verify Equity Amount

You can begin the process of canceling your PMI when you calculate that your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Next, you will be asked to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.

At First Residential Mortgage, we answer questions about PMI every day. Call us: 276-782-1677.