Canceling Private Mortgage Insurance

Although lenders have been required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the balance goes under 78% of the price of purchase, they do not have to take similar action if the borrower's equity is over 22%. (Some "higher risk" mortgage loans are excluded.) The good news is that you can cancel your PMI yourself (for your loan closing after July '99), no matter the original price of purchase, when your equity gets to twenty percent.

Verify the numbers

Keep a running total of your principal payments. Also keep track of how much other homes are selling for in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you probably haven't had a chance to pay very much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

As soon as your equity has reached the desired twenty percent, you are not far away from stopping your PMI payments, once and for all. First you will let your lender know that you are asking to cancel PMI. Next, you will be asked to verify that you have at least 20 percent equity. You can acquire 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 lenders before canceling PMI.

At Atlantic Financial Services, we answer questions about PMI every day. Give us a call: (732) 969-9300.

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