Canceling Private Mortgage Insurance

For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (This legal requirment does not include certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan closing after July '99), without considering the original purchase price, once the equity climbs to twenty percent.

Verify the numbers

Analyze your monthly statements often. You'll want to stay aware of the prices of the houses that are selling in your neighborhood. Unfortunately, if you have a recent mortgage - five years or fewer, you likely haven't started to pay very much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

When you find you have achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will first let your lending institution know that you are asking to cancel your PMI. Next, you will be asked to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably require one before they'll cancel PMI.

Cottingham Mortgage Inc. can answer questions about PMI and many others. Call us: (800) 288-9693.

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