Canceling Private Mortgage Insurance

Although lending institutions have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance gets below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is above 22%. (This legal obligation does not include a number of higher risk mortgages.) However, if your equity gets to 20% (no matter what the original price was), you are able to cancel PMI (for a mortgage loan that after July 1999).

Do your homework

Familiarize yourself with your mortgage statements to keep a running total of principal payments. Make yourself aware of the purchase prices of other houses in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or under, you likely haven't had a chance to pay a lot of the principal: you have been paying mostly interest.

Proof of Equity

When you think you've achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will need to contact the mortgage lender to let them know that you wish to cancel PMI. Your lender will require proof that your equity is high enough. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.

At America's Money Source, we answer questions about PMI every day. Call us at 4078987559.