Make Private Mortgage Insurance a Thing of the Past

For loans closed after July 1999, lending institutions 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 loan reaches 22 percent equity. (This legal obligation does not cover a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed past July '99), regardless of the original purchase price, after your equity rises to twenty percent.

Do your homework

Familiarize yourself with your monthly statements to keep your eye on principal payments. Also stay aware of the price that other homes are purchased for in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or under, you probably haven't begun to pay very much of the principal: you have been paying mostly interest.

Proof of Equity

As soon as your equity has reached the desired twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. Call your lender to ask for cancellation of your PMI. Lending institutions require proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably request one before they agree to cancel.

At Chris Caggiano - Grand Oaks Funding, LLC, we answer questions about PMI every day. Call us: (718) 477-4405.

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