Make Private Mortgage Insurance a Thing of the Past

Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of that year) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity climbs to over twenty-two percent. (Some "higher risk" mortgage loans are not included.) The good news is that you can request cancelation of your PMI yourself (for a loan closing after July '99), regardless of the original purchase price, once the equity reaches twenty percent.

Verify the numbers

Keep a running total of each principal payment. Also be aware of the price that other homes are purchased for in your neighborhood. Unfortunately, if you have a new loan - five years or under, you likely haven't started to pay a lot of the principal: you have been paying mostly interest.

The Proof is in the Appraisal

As soon as your equity has reached the required twenty percent, you are not far away from stopping your PMI payments, for the life of your loan. You will first let your lending institution know that you are asking to cancel PMI. Lenders request proof of eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.

At The Mortgage Exchange Service LLC, we answer questions about PMI every day. Call us at 703.255-5810.

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