Make Private Mortgage Insurance a Thing of the Past

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For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of the purchase price - but not at the point the borrower achieves 22 percent equity. (The law does not cover a number of higher risk mortgages.) However, you have the right to cancel PMI yourself (for mortgages closed past July 1999) at the point your equity rises to 20 percent, without consideration of the original purchase price.

Verify the numbers

Study your statements often. You'll want to stay aware of the prices of the homes that are selling in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't been reduced by much.

Proof of Equity

You can start the process of canceling PMI when you you think that your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI. Lending institutions ask for proof of eligibility at this point. You can get documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

First Funding can help find out if you can eliminate your PMI. Call us at (408) 540-0200.

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