Canceling Private Mortgage Insurance

For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (A number of "higher risk" morgages are excluded.) However, you can actually cancel PMI yourself (for loans made past July 1999) when your equity reaches 20 percent, without consideration of the original price of purchase.

Verify the numbers

Keep track of money going toward the principal. Pay attention to the selling prices of other houses in your immediate area. Unfortunately, if you have a recent loan - five years or under, you likely haven't had a chance to pay very much of the principal: you have been paying mostly interest.

Verify Equity Amount

You can start the process of PMI cancelation when you're sure your equity has reached 20%. First you will let your lending institution know that you are requesting to cancel PMI. The lending institution will require proof that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and almost all lenders require one before they agree to cancel PMI.

At 1st Credential Mortgage Inc, we answer questions about PMI every day. Call us at (281) 778-0805.