Canceling Private Mortgage Insurance

For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) However, you have the right to cancel PMI yourself (for mortgages made after July 1999) once your equity rises to 20 percent, regardless of the original price of purchase.

Verify the numbers

Keep track of each principal payment. Find out the purchase prices of other homes in your immediate area. If your mortgage is under five years old, probably you haven't paid down much principal � you have been paying mostly interest.

The Proof is in the Appraisal

When you determine you have achieved at least 20 percent equity, you can begin the process of getting PMI out of your budget. Contact the lending institution to request cancellation of your PMI. The lending institution will require documentation that your equity is at 20 percent or above. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.

Channel Mortgage LLC can answer questions about PMI and many others. Call us at (718) 639-9500.

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