Canceling Private Mortgage Insurance

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While lenders have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance goes under 78% of the purchase price, they do not have to take similar action if the loan's equity is over 22%. (There are exceptions -like some loans considered 'high risk'.) But you have the right to cancel PMI yourself (for loans made after July 1999) at the point your equity reaches 20 percent, no matter the original price of purchase.

Keep a record of payments

Study your statements often. Find out the selling prices of other houses in your immediate area. Unfortunately, if yours is a new loan - five years or fewer, you likely haven't had a chance to pay very much of the principal: you have been paying mostly interest.

Proof of Equity

Once you think you've reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to contact the mortgage lender to let them know that you want to cancel PMI. The lending institution will request documentation that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount - and your lender will probably require one before they'll cancel PMI.

Mortgage Headquarters of Missouri, Inc can answer questions about PMI and many others. Give us a call at (573) 302-9990.

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