Make Private Mortgage Insurance a Thing of the Past

For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (A number of "higher risk" mortgage loans are excluded.) But if your equity rises to 20% (regardless of the original price of purchase), you have the legal right to cancel your PMI (for a mortgage that past July 1999).

Do your homework

Keep track of each principal payment. You'll want to keep track of the the purchase prices of the houses that sell in your neighborhood. Unfortunately, if you have a new mortgage - five years or fewer, you probably haven't been able to pay much of the principal: you are paying mostly interest.

Verify Eligibility

You can begin the process of PMI cancelation at the time you're sure your equity has risen to 20%. You will need to contact your mortgage lender to let them know that you wish to cancel PMI. Then you will be asked to submit documentation 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 verify your home's equity and eligibility for PMI cancellation.

At Capacity Lending, LLC, we answer questions about PMI every day. Call us at 469-640-0400.

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