Make Private Mortgage Insurance a Thing of the Past

While lending institutions have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets below 78% of the price of purchase, they do not have to cancel automatically if the equity is more than 22%. (This legal obligation does not apply to some higher risk mortgages.) But if your equity gets to 20% (regardless of the original purchase price), you can cancel your PMI (for a mortgage loan that after July 1999).

Verify the numbers

Familiarize yourself with your loan statements to keep a running total of principal payments. Make yourself aware of the purchase prices of other homes in your neighborhood. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.

The Proof is in the Appraisal

Once your equity has reached the desired twenty percent, you are just a few steps away from getting rid of your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI payments. Your lender will ask for proof that your equity is high enough. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.

At Great Mortgage NMLS#478647, we answer questions about PMI every day. Give us a call: 708.966.9005.

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