Canceling Private Mortgage Insurance

Beginning in 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed past July of that year) goes beneath seventy-eight percent of the price of purchase, but not at the point the loan's equity climbs to twenty-two percent or higher. (Some "higher risk" mortgage loans are not included.) The good news is that you can cancel your PMI yourself (for a mortgage loan that closed after July '99), without considering the original purchase price, at the point the equity gets to twenty percent.

Keep a running total of payments

Analyze your statements often. You'll want to stay aware of the the purchase amounts of the homes that sell in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

Once you think you've achieved at least 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you wish to cancel PMI payments. Then you will be required to submit documentation that you have at least 20 percent equity. You can acquire documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

At Hawk Mortgage Group, we answer questions about PMI every day. Give us a call at (443) 619-7900.

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