Eliminating Private Mortgage Insurance

For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (The legal obligation does not apply to certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a loan closing past July '99), without considering the original price of purchase, at the point the equity gets to twenty percent.

Do your homework

Keep track of each principal payment. Make yourself aware of the purchase prices of other homes in your immediate area. You've been paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't lowered much.

The Proof is in the Appraisal

When you determine you've achieved at least 20 percent equity, you can start the process of freeing yourself from PMI payments. You will first let your lender know that you are asking to cancel your PMI. The lending institution will request proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and most lenders will require one before they'll cancel PMI.

At Stepping Stone Mortgage, we answer questions about PMI every day. Give us a call at 5416833300.