Eliminating Private Mortgage Insurance

For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (Some "higher risk" loan programs are not included.) However, you have the right to cancel PMI yourself (for mortgage loans made past July 1999) once your equity reaches 20 percent, regardless of the original purchase price.

Keep track of payments

Review your mortgage statements often. Also stay aware of how much other homes are purchased for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't lowered much.

The Proof is in the Appraisal

At the point you think you have reached 20 percent equity in your home, you can start the process of canceling your Private Mortgage Insurance. Contact your lender to request cancellation of your Private Mortgage Insurance. The lending institution will ask for proof that your equity is high enough. Usually lenders require 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 MS Investment Mortgage Company, we answer questions about PMI every day. Give us a call at (858) 485-5800.