Canceling Private Mortgage Insurance

For loans made since July 1999, lenders 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 price � but not when the borrower achieves 22 percent equity. (There are some loans that are not included -like some loans considered 'high risk'.) But you are able to cancel PMI yourself (for mortgages closed after July 1999) once your equity rises to 20 percent, without consideration of the original price of purchase.

Do your homework

Keep track of money going toward the principal. You'll want to keep track of the the purchase prices of the houses that are selling around you. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't been reduced by much.

The Proof is in the Appraisal

Once your equity has reached the desired twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. First you will notify your lender that you are asking to cancel PMI. Lending institutions request documentation verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and almost all lending institutions will require one before they agree to cancel PMI.

At ADVISORY MORTGAGE, we answer questions about PMI every day. Call us: 8102292820.