Eliminating Private Mortgage Insurance

Although lenders have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the mortgage balance dips under 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is more than 22%. (There are some exceptions -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan that closed after July '99), regardless of the original purchase price, at the point the equity gets to twenty percent.

Do your homework

Keep a running total of money going toward the principal. Find out the selling prices of other homes in your neighborhood. Unfortunately, if you have a recent loan - five years or under, you likely haven't been able to pay much of the principal: you are paying mostly interest.

Proof of Equity

You can begin the process of canceling PMI when you you think that your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Then you will be required to verify that you are eligible to cancel. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.

Capacity Lending, LLC can answer questions about PMI and many others. Call us at 469-640-0400.

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