Canceling Private Mortgage Insurance

While lending institutions have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance dips under 78% of the purchase price, they do not have to cancel automatically if the equity is over 22%. (Certain "higher risk" loans are excluded.) But if your equity reaches 20% (regardless of the original price of purchase), you have the right to cancel PMI (for a loan closed past July 1999).

Do your homework

Keep a running total of each principal payment. Also stay aware of the price that other homes are purchased for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't gone down much.

The Proof is in the Appraisal

At the point you find you've achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. Contact your mortgage lender to ask for cancellation of PMI. Lending institutions ask for paperwork verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.

At Firelight Mortgage Consultants, we answer questions about PMI every day. Give us a call at (720) 550-4235.

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