Eliminating Private Mortgage Insurance

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For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase price - but not at the point the borrower achieves 22 percent equity. (The legal requirement does not include a number of higher risk mortgages.) However, if your equity reaches 20% (regardless of the original purchase price), you are able to cancel the PMI (for a loan that after July 1999).

Verify the numbers

Keep track of your principal payments. You'll want to be aware of the the purchase amounts of the homes that sell around you. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you probably haven't started to pay much of the principal: you have been paying mostly interest.

Proof of Equity

At the point your equity has risen to the magic number of twenty percent, you are not far away from stopping your PMI payments, once and for all. You will first tell your lender that you are asking to cancel your PMI. Then you will be asked to verify that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

Security Mortgage Co can answer questions about PMI and many others. Call us at 972.359.7766.

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