Eliminating Private Mortgage Insurance

Although lending institutions have been obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is over 22%. (Some "higher risk" loans are excluded.) However, if your equity reaches 20% (no matter what the original purchase price was), you are able to cancel PMI (for a mortgage that after July 1999).

Do your homework

Keep track of money going toward the principal. Find out the purchase prices of other houses in your immediate area. If your mortgage is fewer than five years old, probably you haven't greatly reduced principal � you have paid mostly interest.

Verify Eligibility

You can begin the process of canceling your PMI at the time you're sure your equity has risen to 20%. You will first let your lending institution know that you are asking to cancel PMI. Lending institutions request paperwork verifying your eligibility at this point. You can get documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

At U.S.A. Lending, Inc., we answer questions about PMI every day. Call us at 305-967-7200.