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 under 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (The law does not include some higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgages made after July 1999) when your equity gets to 20 percent, without consideration of the original purchase price.

Verify the numbers

Keep a running total of your principal payments. You'll want to stay aware of the the purchase amounts of the houses that sell around you. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't gone down much.

The Proof is in the Appraisal

Once your equity has reached the required twenty percent, you are just a few steps away from stopping your PMI payments, once and for all. You will need to call your lender to alert them that you want to cancel PMI payments. Then you will be asked to submit documentation that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

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

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