Eliminating Private Mortgage Insurance

Although lending institutions have been required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance gets under 78% of the purchase price, they do not have to cancel automatically if the loan's equity is more than 22%. (Certain "higher risk" morgages are excluded.) But if your equity reaches 20% (regardless of the original purchase price), you have the legal right to cancel your PMI (for a loan that after July 1999).

Verify the numbers

Familiarize yourself with your loan statements to keep a running total of principal payments. You'll want to stay aware of the the purchase amounts of the houses that sell in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you likely haven't started to pay very much of the principal: you have been paying mostly interest.

Proof of Equity

When you determine you've reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. Call the mortgage lender to ask for cancellation of PMI. Lending institutions require proof of eligibility at this point. Most 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 canceling PMI.

The Lending Source can answer questions about PMI and many others. Give us a call: (973) 601-2122.

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