Canceling Private Mortgage Insurance

Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed after July of that year) reaches less than seventy-eight percent of the purchase price, but not at the point the loan's equity reaches over twenty-two percent. (There are exceptions -like some "high risk' loans.) But if your equity gets to 20% (regardless of the original price of purchase), you have the legal right to cancel your PMI (for a mortgage closed after July 1999).

Do your homework

Keep a running total of each principal payment. Also stay aware of the price that other homes are purchased for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't paid down much principal � it's been mostly interest.

Proof of Equity

At the point your equity has reached the required twenty percent, you are just a few steps away from stopping your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI payments. The lending institution will ask for documentation that your equity is at 20 percent or above. A state certified appraisal documented on 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 Foxfield Financial, we answer questions about PMI every day. Call us: 720-598-8300.

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