Eliminating Private Mortgage Insurance

Since 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made after July of that year) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity reaches twenty-two percent or more. (There are some exceptions -like certain "high risk' loans.) However, you are able to cancel PMI yourself (for loans made past July 1999) when your equity reaches 20 percent, regardless of the original purchase price.

Do your homework

Familiarize yourself with your mortgage statements to keep a running total of principal payments. Also be aware of what other homes are being sold for in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or fewer, you probably haven't had a chance to pay very much of the principal: you are paying mostly interest.

Verify Equity Amount

Once your equity has risen to the required twenty percent, you are close to canceling your PMI payments, once and for all. Call the mortgage lender to request cancellation of 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 using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

At Cottingham Mortgage Inc., we answer questions about PMI every day. Call us: (800) 288-9693.

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