Eliminating Private Mortgage Insurance

For loans closed after July 1999, lenders are obligated (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 at the point the borrower earns 22 percent equity. (There are some loans that are excluded -like some loans considered 'high risk'.) But if your equity reaches 20% (regardless of the original purchase price), you can cancel the PMI (for a mortgage that after July 1999).

Do your homework

Study your statements often. You'll want to stay aware of the the purchase prices of the homes that sell in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't made much progress with the principal � you have been paying mostly interest.

The Proof is in the Appraisal

At the point you determine you've achieved at least 20 percent equity, you can start the process of getting PMI out of your budget. You will need to contact your mortgage lender to let them know that you wish to cancel PMI payments. Next, you will be required to verify that you are eligible to cancel. You can acquire proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

Custom Lending Group can answer questions about PMI and many others. Give us a call at (707) 252-2700.

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