Eliminating Private Mortgage Insurance

For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (This legal obligation does not include some higher risk mortgages.) But you have the right to cancel PMI yourself (for loans made after July 1999) when your equity reaches 20 percent, no matter the original price of purchase.

Do your homework

Familiarize yourself with your loan statements to keep a running total of principal payments. Also be aware of what other homes are purchased for in your neighborhood. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.

Verify Equity Amount

Once your equity has risen to the desired twenty percent, you are close to canceling your PMI payments, once and for all. First you will notify your lender that you are asking to cancel your PMI. Next, you will be required to submit proof that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and most lending institutions require one before they agree to cancel.

Statewide Funding can help find out if you can eliminate your PMI. Call us at (415) 456-7802.

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