Eliminating Private Mortgage Insurance

For loans closed 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 the purchase amount � but not at the point the borrower achieves 22 percent equity. (The legal obligation does not cover certain higher risk mortgages.) But you are able to cancel PMI yourself (for loans closed past July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.

Verify the numbers

Keep track of your principal payments. Make yourself aware of the purchase prices of other houses in your immediate area. If your mortgage is fewer than five years old, chances are you haven't greatly reduced principal � it's been mostly interest.

The Proof is in the Appraisal

You can start the process of PMI cancelation when you're sure your equity has risen to 20%. You will need to notify your mortgage lender that you want to cancel PMI payments. Lending institutions require documentation verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.

Channel Mortgage LLC can help find out if you can eliminate your PMI. Give us a call at (718) 639-9500.

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