Canceling Private Mortgage Insurance

Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed past July of '99) reaches less than seventy-eight percent of the purchase price, but not at the time the loan's equity gets to twenty-two percent or more. (This law does not include a number of higher risk mortgages.) However, you have the right to cancel PMI yourself (for mortgage loans made past July 1999) once your equity reaches 20 percent, no matter the original purchase price.

Do your homework

Keep a running total of your principal payments. You'll want to keep track of the the purchase prices of the homes that sell in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or fewer, you probably haven't had a chance to pay a lot of the principal: you have been paying mostly interest.

Verify Eligibility

As soon as your equity has risen to the magic number of twenty percent, you are close to canceling your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI. Lenders ask for documentation verifying your 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 equity and eligibility for PMI cancellation.

The Mortgage Exchange Service LLC can answer questions about PMI and many others. Call us: 703.255-5810.

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