Canceling Private Mortgage Insurance

While lending institutions have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the balance gets below 78% of the purchase price, they do not have to take similar action if the equity is more than 22%. (This law does not apply to certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage closing after July '99), no matter the original purchase price, when the equity rises to twenty percent.

Verify the numbers

Study your statements often. Pay attention to the purchase prices of other houses in your immediate area. Unfortunately, if you have a recent loan - five years or fewer, you probably haven't been able to pay much of the principal: you are paying mostly interest.

Proof of Equity

As soon as your equity has reached the magic number of twenty percent, you are close to getting rid of your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI payments. Your lender will ask for 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 agree to cancel.

At Peerless Residential Mortgage, we answer questions about PMI every day. Give us a call: (513) 713-1515.

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