Eliminating Private Mortgage Insurance

Although lenders have been legally required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance dips below 78% of the price of purchase, they do not have to take similar action if the borrower's equity is over 22%. (Certain "higher risk" loan programs are excluded.) The good news is that you can request cancelation of your PMI yourself (for a mortgage closing past July '99), regardless of the original purchase price, once the equity gets to twenty percent.

Keep track of payments

Familiarize yourself with your monthly statements to keep your eye on principal payments. Make yourself aware of the selling prices of other homes in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or fewer, you likely haven't begun to pay much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

Once you determine you've achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be required to submit proof that you have at least 20 percent equity. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.

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