Eliminating Private Mortgage Insurance

Beginning in 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan made after July of '99) reaches less than seventy-eight percent of the price of purchase, but not at the time the borrower's equity reaches more than twenty-two percent. (There are exceptions -like some loans considered 'high risk'.) But you have the right to cancel PMI yourself (for mortgage loans made after July 1999) once your equity reaches 20 percent, without consideration of the original purchase price.

Do your homework

Familiarize yourself with your monthly statements to keep track of principal payments. You'll want to keep track of the the purchase prices of the houses that are selling around you. If your loan is fewer than five years old, chances are you haven't made much progress with the principal � you have paid mostly interest.

Verify Eligibility

You can start the process of canceling your PMI when you calculate that your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI. Then you will be asked to verify that you are eligible to cancel. You can acquire proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.

At Homewood Mortgage, Inc., we answer questions about PMI every day. Give us a call: 205-941-1484.

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