Canceling Private Mortgage Insurance

For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of the purchase price � but not when the borrower earns 22 percent equity. (This legal obligation does not cover a number of higher risk mortgages.) But if your equity reaches 20% (no matter what the original purchase price was), you have the legal right to cancel your PMI (for a mortgage loan that past July 1999).

Do your homework

Keep track of your principal payments. You'll want to keep track of the prices of the homes that sell in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal most likely hasn't lowered much.

Verify Equity Amount

At the point your equity has risen to the required 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 wish to cancel PMI. Then you will be required to submit documentation that you have at least 20 percent equity. 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 request one before they'll cancel PMI.

Foxfield Financial can answer questions about PMI and many others. Give us a call at 720-598-8300.

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