Goodbye, PMI!

Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made past July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the borrower's equity climbs to over twenty-two percent. (The legal requirment does not include some higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgages made after July 1999) at the point your equity rises to 20 percent, regardless of the original price of purchase.

Do your homework

Familiarize yourself with your monthly statements to keep a running total of principal payments. You'll want to stay aware of the the purchase amounts of the houses that are selling in your neighborhood. You've been paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal most likely hasn't been reduced by much.

The Proof is in the Appraisal

You can start the process of PMI cancelation as soon as you're sure your equity reaches 20%. You will need to call the lender to alert them that you want to cancel PMI payments. Your lender will ask for proof that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and most lenders will require one before they'll cancel PMI.

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

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