Canceling Private Mortgage Insurance

Since 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed after July of that year) goes below seventy-eight percent of the price of purchase, but not at the time the borrower's equity reaches twenty-two percent or more. (A number of "higher risk" mortgage loans are excluded.) However, you can actually cancel PMI yourself (for mortgages made after July 1999) when your equity gets to 20 percent, regardless of the original price of purchase.

Do your homework

Review your statements often. Also stay aware of the price that other homes are purchased for in your neighborhood. You are paying mostly interest if you closed your loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.

Proof of Equity

When you think you have reached 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. First you will tell your lender that you are requesting to cancel PMI. Then you will be required to verify that you are eligible to cancel. You can get documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

At ADVISORY MORTGAGE, we answer questions about PMI every day. Give us a call at 8102292820.