Canceling Private Mortgage Insurance

Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed after July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity gets to higher than twenty-two percent. (Some "higher risk" morgages are not included.) But you are able to cancel PMI yourself (for mortgage loans closed after July 1999) once your equity reaches 20 percent, without consideration of the original purchase price.

Keep a record of payments

Keep a running total of money going toward the principal. Pay attention to the prices of other homes in your immediate area. Unfortunately, if yours is a recent mortgage - five years or under, you likely haven't started to pay a lot of the principal: you are paying mostly interest.

Proof of Equity

You can begin the process of canceling your PMI when you calculate that your equity reaches 20%. You will need to contact your lender to let them know that you want to cancel PMI. Then you will be required to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

At Foxfield Financial, we answer questions about PMI every day. Give us a call at 720-598-8300.

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