Eliminating Private Mortgage Insurance

Although lending institutions have been legally required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the balance gets under 78% of the price of purchase, they do not have to take similar action if the borrower's equity is more than 22%. (Some "higher risk" morgages are not included.) But you have the right to cancel PMI yourself (for loans made past July 1999) at the point your equity rises to 20 percent, without consideration of the original purchase price.

Do your homework

Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to stay aware of the prices of the houses that sell around you. If your loan is fewer than five years old, probably you haven't greatly reduced principal � you have been paying mostly interest.

Verify Equity Amount

You can start the process of PMI cancelation when you're sure your equity has risen to 20%. You will need to call the lender to let them know that you wish to cancel PMI. Then you will be asked to verify that you are eligible to cancel. Usually lenders require 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 The Reen Team at American Pacific Mortgage, we answer questions about PMI every day. Call us: (408) 626-1879.

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