Canceling Private Mortgage Insurance

Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan closed past July of '99) goes down below seventy-eight percent of the purchase price, but not when the loan's equity climbs to over twenty-two percent. (Certain "higher risk" loans are excluded.) However, you have the right to cancel PMI yourself (for mortgage loans made after July 1999) once your equity reaches 20 percent, without consideration of the original purchase price.

Do your homework

Familiarize yourself with your loan statements to keep your eye on principal payments. Pay attention to the selling prices of other houses in your neighborhood. If your loan is fewer than five years old, probably you haven't greatly reduced principal � it's been mostly interest.

The Proof is in the Appraisal

You can begin the process of canceling PMI when you determine your equity has reached 20%. First you will let your lending institution know that you are requesting to cancel PMI. Then you will be asked to verify that you have at least 20 percent equity. You can get documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

Lighthouse Mortgage Company can answer questions about PMI and many others. Call us: (916) 434-8915.

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