Eliminating Private Mortgage Insurance

While lending institutions have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets below 78% of the purchase price, they do not have to take similar action if the loan's equity is above 22%. (The legal requirment does not cover a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed past July '99), without considering the original price of purchase, once the equity reaches twenty percent.

Do your homework

Keep track of money going toward the principal. You'll want to be aware of the the purchase amounts of the homes that are selling around you. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't lowered much.

The Proof is in the Appraisal

At the point your equity has risen to the magic number of twenty percent, you are just a few steps away from stopping your PMI payments, once and for all. You will first notify your lender that you are asking to cancel your PMI. Lenders ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel PMI.

At Lighthouse Mortgage Company, we answer questions about PMI every day. Give us a call at (916) 434-8915.

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