Canceling Private Mortgage Insurance

For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (This legal requirment does not apply to some higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgages made after July 1999) once your equity reaches 20 percent, regardless of the original price of purchase.

Do your homework

Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to keep track of the prices of the houses that are selling in your neighborhood. If your loan is fewer than five years old, probably you haven't made much progress with the principal � you have been paying mostly interest.

The Proof is in the Appraisal

Once you think you have reached 20 percent equity, you can start the process of freeing yourself from PMI payments. You will first let your lender know that you are asking to cancel your PMI. Lending institutions request proof of eligibility at this point. You can acquire documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

Front Range Lending can help find out if you can eliminate your PMI. Call us at 7202537070.