Eliminating Private Mortgage Insurance

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For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of your purchase amount - but not when the borrower earns 22 percent equity. (This legal requirement does not cover certain higher risk mortgages.) But if your equity gets to 20% (no matter what the original purchase price was), you have the legal right to cancel PMI (for a mortgage that after July 1999).

Keep track of payments

Familiarize yourself with your loan statements to keep a running total of principal payments. You'll want to stay aware of the the purchase prices of the houses that are selling in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't been reduced by much.

Proof of Equity

You can begin the process of canceling PMI at the time you you think that your equity reaches 20%. You will first let your lending institution know that you are asking to cancel PMI. Lending institutions request proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.

Pacific Capital Mortgage Corp can help find out if you can eliminate your PMI. Call us: 714-939-3863.