Canceling Private Mortgage Insurance

Although lending institutions have been obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the mortgage balance gets below 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is more than 22%. (The legal requirment does not cover some higher risk mortgages.) But you can actually cancel PMI yourself (for mortgage loans closed past July 1999) once your equity rises to 20 percent, without consideration of the original price of purchase.

Keep a record of payments

Study your statements often. Make yourself aware of the purchase prices of other houses in your immediate area. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

Once your equity has risen to the magic number of twenty percent, you are close to canceling your PMI payments, once and for all. Call your mortgage lender to request cancellation of your Private Mortgage Insurance. Then you will be required to submit documentation that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At MidTowne Mortgage, we answer questions about PMI every day. Give us a call: (478) 746-2063.

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