Goodbye, PMI!

While lenders have been obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the loan balance dips under 78% of the price of purchase, they do not have to take similar action if the equity is more than 22%. (There are exceptions -like certain "high risk' loans.) But you have the right to cancel PMI yourself (for mortgage loans made past July 1999) when your equity gets to 20 percent, without consideration of the original price of purchase.

Do your homework

Familiarize yourself with your monthly statements to keep a running total of principal payments. You'll want to be aware of the the purchase amounts of the houses that sell around you. You are paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't been reduced by much.

Proof of Equity

You can begin the process of PMI cancelation when you're sure your equity has reached 20%. You will first notify your lender that you are asking to cancel PMI. Then you will be required to submit proof that you are eligible to cancel. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At Southwest Funding #841, we answer questions about PMI every day. Call us: (512) 291-6100.

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