Make Private Mortgage Insurance a Thing of the Past

For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (Certain "higher risk" loans are not included.) But if your equity reaches 20% (regardless of the original price of purchase), you have the right to cancel PMI (for a mortgage closed past July 1999).

Keep a record of payments

Analyze your statements often. Find out the selling prices of other homes in your immediate area. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't gone down much.

The Proof is in the Appraisal

As soon as your equity has risen to the required twenty percent, you are not far away from stopping your PMI payments, once and for all. Contact your mortgage lender to request cancellation of PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. Most 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.

At The Lending Source, we answer questions about PMI every day. Give us a call at (973) 601-2122.

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