Canceling Private Mortgage Insurance

Although lenders have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance dips below 78% of the purchase price, they do not have to take similar action if the borrower's equity is more than 22%. (There are exceptions -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for mortgages closed past July 1999) when your equity rises to 20 percent, without consideration of the original purchase price.

Do your homework

Familiarize yourself with your monthly statements to keep a running total of principal payments. Find out the purchase prices of other houses in your immediate area. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't been reduced by much.

Proof of Equity

Once you find you have achieved at least 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. You will first let your lender know that you are requesting to cancel PMI. Lenders ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and most lenders require one before they agree to cancel.

The Mortgage Exchange Service LLC can help find out if you can eliminate your PMI. Give us a call at 703.255-5810.

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