Eliminating Private Mortgage Insurance

For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of the purchase price � but not at the point the borrower earns 22 percent equity. (This legal obligation does not include a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed after July '99), without considering the original purchase price, after the equity gets to twenty percent.

Keep a record of payments

Keep a running total of your principal payments. You'll want to keep track of the the purchase amounts of the homes that are selling around you. If your mortgage is under five years old, chances are you haven't made much progress with the principal � you have paid mostly interest.

The Proof is in the Appraisal

At the point 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 first let your lending institution know that you are requesting to cancel PMI. Lending institutions require proof of eligibility at this point. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.

At South County Mortgage, we answer questions about PMI every day. Call us at (401) 583-4150.

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