Goodbye, PMI!

For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) But you can actually cancel PMI yourself (for mortgages closed after July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.

Keep track of payments

Keep a running total of each principal payment. You'll want to stay aware of the the purchase prices of the homes that are selling in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you probably haven't been able to pay a lot of the principal: you are paying mostly interest.

Proof of Equity

When you think you have achieved at least 20 percent equity in your home, 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. The lending institution will request documentation that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.

Custom Lending Group can help find out if you can eliminate your PMI. Call us: (707) 252-2700.

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