Eliminating Private Mortgage Insurance

For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (Some "higher risk" loans are excluded.) But if your equity reaches 20% (no matter what the original purchase price was), you have the right to cancel the PMI (for a mortgage loan closed past July 1999).

Do your homework

Keep a running total of each principal payment. Pay attention to the prices of other houses in your immediate area. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't lowered much.

The Proof is in the Appraisal

Once you think you've achieved at least 20 percent equity, you can begin the process of getting PMI out of your budget. Contact the mortgage lender to request cancellation of PMI. Your lender will require proof that your equity is at 20 percent or above. Most 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 Financial Edge Mortgage Corp., we answer questions about PMI every day. Call us: 425-508-9988.

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