Eliminating Private Mortgage Insurance

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 falls lower than 78 percent of the purchase price � but not when the borrower earns 22 percent equity. (This legal requirment does not include certain higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgage loans closed after July 1999) at the point your equity reaches 20 percent, regardless of the original price of purchase.

Verify the numbers

Familiarize yourself with your monthly statements to keep track of principal payments. Also stay aware of what other homes are purchased for in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't gone down much.

Proof of Equity

You can start the process of canceling your PMI at the time you determine your equity reaches 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. Your lender will request proof that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they'll cancel PMI.

Farm Credit of the Virginias can help find out if you can eliminate your PMI. Call us: (800) 919-3276.

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