Goodbye, PMI!

For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase amount � but not when the borrower achieves 22 percent equity. (This legal requirment does not include certain higher risk mortgages.) But you are able to cancel PMI yourself (for mortgages made after July 1999) at the point your equity reaches 20 percent, no matter the original price of purchase.

Verify the numbers

Keep a running total of each principal payment. You'll want to be aware of the the purchase amounts of the homes that sell around you. If your loan is under five years old, chances are you haven't greatly reduced principal � you have paid mostly interest.

The Proof is in the Appraisal

As soon as your equity has reached the magic number of twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. You will first let your lending institution know that you are asking to cancel your PMI. Lenders request 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 PMI cancellation.

At Custom Lending Group, we answer questions about PMI every day. Call us: (707) 252-2700.

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