Goodbye, PMI!

Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made after July of that year) reaches less than seventy-eight percent of the purchase price, but not at the point the loan's equity climbs to twenty-two percent or more. (This legal obligation does not apply to certain higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgage loans closed past July 1999) at the point your equity rises to 20 percent, no matter the original purchase price.

Do your homework

Keep track of your principal payments. Also keep track of what other homes are selling for in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you likely haven't started to pay much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

At the point you think you've reached 20 percent equity in your home, you can begin the process of getting PMI out of your budget. Call the mortgage lender to ask for cancellation of your PMI. Lending institutions ask for documentation verifying your eligibility at this point. Usually lenders require 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.

First Community Bank of Central Al. can help find out if you can eliminate your PMI. Call us: (334) 285-8850.

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