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Canceling Private Mortgage Insurance

Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made after July of '99) reaches less than seventy-eight percent of the price of purchase, but not at the time the loan's equity gets to twenty-two percent or higher. (There are some exceptions -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for a mortgage closing after July '99), regardless of the original price of purchase, at the point your equity rises to twenty percent.

Do your homework

Keep track of each principal payment. Also stay aware of the price that other homes are selling for in your neighborhood. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.

The Proof is in the Appraisal

Once your equity has reached the desired twenty percent, you are just a few steps away from stopping your PMI payments, once and for all. You will first tell your lender that you are requesting to cancel your PMI. Then you will be required to submit proof that you have at least 20 percent equity. You can acquire documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At Greystone Loans, Inc., we answer questions about PMI every day. Give us a call at (909) 467-1090.

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