Make Private Mortgage Insurance a Thing of the Past

Although lending institutions have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance gets under 78% of the purchase price, they do not have to cancel PMI automatically if the equity is more than 22%. (The legal requirment does not include some higher risk mortgages.) But you have the right to cancel PMI yourself (for loans made past July 1999) at the point your equity gets to 20 percent, without consideration of the original price of purchase.

Verify the numbers

Familiarize yourself with your monthly statements to keep your eye on principal payments. Pay attention to the purchase prices of other houses in your immediate area. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal most likely hasn't gone down much.

The Proof is in the Appraisal

You can begin the process of canceling PMI as soon as you're sure your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Then you will be asked to submit documentation that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably request one before they'll cancel PMI.

At Tier One Mortgage, LLC, we answer questions about PMI every day. Call us: (585) 282-0960.