Make Private Mortgage Insurance a Thing of the Past

For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (This legal requirment does not include a number of higher risk mortgages.) But if your equity rises to 20% (no matter what the original purchase price was), you can cancel PMI (for a mortgage closed after July 1999).

Verify the numbers

Familiarize yourself with your monthly statements to keep a running total of principal payments. Also be aware of what other homes are purchased for in your neighborhood. If your loan is under 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 magic number of twenty percent, you are close to canceling your PMI payments, for the life of your loan. Contact your lending institution to ask for cancellation of PMI. Lending institutions ask for documentation verifying your eligibility at this point. Usually lenders require 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.

At Real Property Finance, we answer questions about PMI every day. Give us a call: 310-379-5997.

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