Canceling Private Mortgage Insurance

Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans closed past July of '99) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity gets to more than twenty-two percent. (This legal obligation does not include certain higher risk mortgages.) But if your equity gets to 20% (no matter what the original price was), you can cancel your PMI (for a mortgage loan that after July 1999).

Do your homework

Keep a running total of your principal payments. You'll want to keep track of the the purchase prices of the homes that sell in your neighborhood. Unfortunately, if yours is a recent loan - five years or under, you probably haven't begun to pay much of the principal: you have been paying mostly interest.

Proof of Equity

At the point you find you've achieved at least 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will need to call your mortgage lender to let them know that you wish to cancel PMI payments. Then you will be asked to verify that you are eligible to cancel. You can acquire documentation 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.

At SkyWest Mortgage, we answer questions about PMI every day. Give us a call at (916) 399-5500.

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