Canceling Private Mortgage Insurance

Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed past July of '99) goes beneath seventy-eight percent of the price of purchase, but not at the point the borrower's equity reaches over twenty-two percent. (The legal requirment does not apply to some higher risk mortgages.) However, if your equity reaches 20% (no matter what the original purchase price was), you are able to cancel PMI (for a mortgage loan that after July 1999).

Do your homework

Keep a running total of each principal payment. You'll want to stay aware of the the purchase amounts of the homes that are selling around you. You've been paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.

Proof of Equity

You can start the process of canceling PMI at the time you you think that your equity reaches 20%. Call the lending institution to request cancellation of your Private Mortgage Insurance. Your lender will request documentation that your equity is high enough. You can acquire proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

The Reen Team at American Pacific Mortgage can answer questions about PMI and many others. Give us a call: (408) 626-1879.

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