Eliminating Private Mortgage Insurance

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Beginning in 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans made past July of that year) goes below seventy-eight percent of the purchase price, but not when the loan's equity reaches over twenty-two percent. (The legal requirement does not cover certain higher risk mortgages.) But you can actually cancel PMI yourself (for mortgage loans made after July 1999) once your equity gets to 20 percent, no matter the original price of purchase.

Do your homework

Keep a running total of each principal payment. Pay attention to the purchase prices of other houses in your immediate area. You've been paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.

Proof of Equity

At the point your equity has risen to the magic number of twenty percent, you are not far away from stopping your PMI payments, once and for all. First you will let your lender know that you are asking to cancel your PMI. Lending institutions require documentation verifying your eligibility at this point. You can get documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At Excel Mortgage Corp. USA , we answer questions about PMI every day. Give us a call at (610) 647-5454.