Make Private Mortgage Insurance a Thing of the Past

For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (This legal obligation does not include certain higher risk mortgages.) However, if your equity gets to 20% (regardless of the original price of purchase), you have the legal right to cancel PMI (for a mortgage closed past July 1999).

Do your homework

Familiarize yourself with your monthly statements to keep a running total of principal payments. Make yourself aware of the selling prices of other homes in your neighborhood. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.

The Proof is in the Appraisal

As soon as your equity has reached the desired twenty percent, you are just a few steps away from canceling your PMI payments, for the life of your loan. Call the mortgage lender to request cancellation of PMI. The lending institution will require proof that your equity is high enough. You can acquire proof of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.

At Southeastern Mortgage Solutions, Inc. NMLS 170525, we answer questions about PMI every day. Give us a call at 770-452-1424.