Eliminating Private Mortgage Insurance

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While lending institutions have been obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the loan balance goes below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is more than 22%. (The law does not cover a number of higher risk mortgages.) The good news is that you can request cancellation of your PMI yourself (for your loan that closed after July '99), regardless of the original price of purchase, after the equity climbs to twenty percent.

Keep a record of payments

Keep track of each principal payment. Make yourself aware of the purchase prices of other houses in your neighborhood. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't gone down much.

The Proof is in the Appraisal

Once you determine you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. First you will let your lender know that you are asking to cancel PMI. Your lender will require proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount - and almost all lenders will require one before they'll cancel PMI.

At Leatherstocking Group, Inc., we answer questions about PMI every day. Call us at 607-547-5007.