Canceling Private Mortgage Insurance

Although lending institutions have been legally required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the balance gets below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is over 22%. (A number of "higher risk" mortgage loans are excluded.) But you can actually cancel PMI yourself (for mortgage loans closed past July 1999) at the point your equity gets to 20 percent, no matter the original price of purchase.

Do your homework

Keep a running total of money going toward the principal. Pay attention to the selling prices of other houses in your immediate area. If your loan is fewer than five years old, probably you haven't greatly reduced principal � you have paid mostly interest.

Proof of Equity

Once you determine you've reached 20 percent equity in your home, you can begin the process of getting PMI out of your budget. You will need to notify your mortgage lender that you want to cancel PMI. The lending institution will require documentation that your equity is high enough. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At Nationwide Home Loans, we answer questions about PMI every day. Give us a call: (562) 693-5048.

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