Make Private Mortgage Insurance a Thing of the Past

While lenders have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance dips below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is more than 22%. (A number of "higher risk" morgages are excluded.) But if your equity rises to 20% (regardless of the original price of purchase), you can cancel your PMI (for a mortgage loan that after July 1999).

Verify the numbers

Study your monthly statements often. Find out the purchase prices of other homes in your neighborhood. If your loan is fewer than five years old, chances are you haven't paid down much principal � you have paid mostly interest.

The Proof is in the Appraisal

Once you find you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will need to contact your mortgage lender to let them know that you wish to cancel PMI payments. Then you will be asked to submit documentation that you have at least 20 percent equity. You can get documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At Firelight Mortgage Consultants, we answer questions about PMI every day. Call us: (303) 228-2254.

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