Canceling Private Mortgage Insurance

Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed past July of that year) reaches less than seventy-eight percent of the price of purchase, but not at the time the borrower's equity climbs to more than twenty-two percent. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) However, you have the right to cancel PMI yourself (for loans made after July 1999) at the point your equity rises to 20 percent, no matter the original purchase price.

Verify the numbers

Familiarize yourself with your loan statements to keep a running total of principal payments. Pay attention to the selling prices of other houses in your immediate area. Unfortunately, if yours is a recent mortgage loan - five years or under, you likely haven't been able to pay a lot of the principal: you are paying mostly interest.

Proof of Equity

You can start the process of PMI cancelation at the time you're sure your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI. Lending institutions request proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably request one before they'll cancel PMI.

At Rasmussen Mortgage, we answer questions about PMI every day. Call us at 608-592-5600.

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