Make Private Mortgage Insurance a Thing of the Past

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For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of the purchase amount - but not when the borrower earns 22 percent equity. (This law does not include some higher risk mortgages.) However, if your equity gets to 20% (regardless of the original price of purchase), you have the right to cancel your PMI (for a mortgage loan that past July 1999).

Verify the numbers

Keep track of money going toward the principal. Also keep track of how much other homes are being sold for in your neighborhood. If your mortgage is fewer than five years old, probably you haven't paid down much principal - it's been mostly interest.

Proof of Equity

Once you determine you have reached 20 percent equity in your home, you can start the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you want to cancel PMI payments. Your lender will ask for proof that your equity is at 20 percent or above. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

Allstate Mortgage Company can answer questions about PMI and many others. Give us a call at (707) 521-3434 Ext. 23.