Canceling Private Mortgage Insurance

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While lenders have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance dips below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is more than 22%. (This law does not include certain higher risk mortgages.) But if your equity gets to 20% (no matter what the original purchase price was), you have the legal right to cancel your PMI (for a mortgage that past July 1999). This in not applicable to all FHA or USDA loans.

Keep a record of payments

Keep track of money going toward the principal. Find out the purchase prices of other houses in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.

Proof of Equity

Once your equity has risen to the required twenty percent, you are close to canceling your PMI payments, once and for all. You will need to contact the lender to let them know that you want to cancel PMI payments. Your lender will ask for documentation that your equity is at 20 percent or above. You can acquire proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

James M. Dix can help find out if you can eliminate your PMI. Give us a call at (317) 288-9434.

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