Canceling Private Mortgage Insurance

For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (Certain "higher risk" mortgage loans are not included.) However, you are able to cancel PMI yourself (for mortgages made after July 1999) when your equity reaches 20 percent, regardless of the original price of purchase.

Verify the numbers

Review your loan statements often. You'll want to be aware of the the purchase amounts of the homes that sell in your neighborhood. If your loan is fewer than five years old, probably you haven't made much progress with the principal � you have been paying mostly interest.

The Proof is in the Appraisal

As soon as your equity has reached the desired twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. You will need to contact the lending institution to alert them that you wish to cancel PMI payments. The lending institution will request documentation that your equity is at 20 percent or above. You can acquire proof of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

At South County Mortgage, we answer questions about PMI every day. Give us a call: (401) 583-4150.

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