Goodbye, PMI!

Although lending institutions have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes below 78% of the purchase price, they do not have to take similar action if the borrower's equity is over 22%. (Some "higher risk" loans are excluded.) However, you can actually 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

Familiarize yourself with your monthly statements to keep track of principal payments. You'll want to keep track of the prices of the houses that sell in your neighborhood. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't lowered much.

The Proof is in the Appraisal

At the point you find you've reached 20 percent equity, you can start the process of getting PMI out of your budget. You will first tell your lender that you are asking to cancel your PMI. The lending institution will require documentation that your equity is high enough. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.

Riviera Funding can answer questions about PMI and many others. Give us a call at (310) 373-7406.

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