Eliminating Private Mortgage Insurance

For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) But if your equity rises to 20% (regardless of the original purchase price), you have the legal right to cancel your PMI (for a mortgage loan closed past July 1999).

Do your homework

Keep track of your principal payments. You'll want to keep track of the the purchase prices of the houses that sell around you. If your loan is fewer than five years old, chances are you haven't made much progress with the principal � it's been mostly interest.

Proof of Equity

You can begin the process of PMI cancelation at the time you you think that your equity reaches 20%. You will need to call your lending institution to let them know that you want to cancel PMI. Lenders require proof of eligibility at this point. You can acquire documentation of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

Avalon Mortgage Services, Inc. can answer questions about PMI and many others. Give us a call: (708) 403-5181.

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