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Canceling Private Mortgage Insurance

While lenders have been obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the balance gets under 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is more than 22%. (Some "higher risk" morgages are not included.) But if your equity rises to 20% (no matter what the original price was), you have the right to cancel PMI (for a mortgage loan that after July 1999).

Keep a record of payments

Keep a running total of money going toward the principal. You'll want to be aware of the the purchase prices of the homes that sell in your neighborhood. Unfortunately, if you have a new loan - five years or under, you likely haven't had a chance to pay much of the principal: you are paying mostly interest.

Proof of Equity

Once you find you have achieved at least 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. Contact your lending institution to request cancellation of your PMI. Then you will be asked to verify that you have at least 20 percent equity. 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 PMI cancellation.

At USA Financial Services, we answer questions about PMI every day. Call us: 714-508-7905.