Make Private Mortgage Insurance a Thing of the Past

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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 balance of the loan goes under 78 percent of your purchase amount - but not when the borrower earns 22 percent equity. (Certain "higher risk" loan programs are excluded.) But if your equity reaches 20% (no matter what the original price was), you are able to cancel PMI (for a loan that past July 1999).

Do your homework

Review your mortgage statements often. Also keep track of the price that other homes are selling for in your neighborhood. You've been paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.

Verify Eligibility

At the point your equity has risen to the magic number of twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. First you will tell your lender that you are requesting to cancel PMI. Your lender will ask for documentation that your equity is high enough. You can acquire proof of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

At Hanson Planning Group, we answer questions about PMI every day. Call us at (303) 300-8601.

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