Make Private Mortgage Insurance a Thing of the Past

For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (This law does not apply to some higher risk mortgages.) But if your equity reaches 20% (regardless of the original price of purchase), you can cancel PMI (for a mortgage loan closed past July 1999).

Keep a running total of payments

Familiarize yourself with your loan statements to keep track of principal payments. Also be aware of how much other homes are purchased for in your neighborhood. If your loan is fewer than five years old, it's likely you haven't paid down much principal � it's been mostly interest.

Proof of Equity

You can start the process of PMI cancelation when you're sure your equity has risen to 20%. You will need to notify your mortgage lender that you want to cancel PMI. Lenders require proof of eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

At Cornerstone Home Mortgage, we answer questions about PMI every day. Call us at 360-570-0106.

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