Mortgage Planning Group

Make Private Mortgage Insurance a Thing of the Past

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For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of your purchase amount – but not when the borrower achieves 22 percent equity. (A number of “higher risk” mortgage loans are not included.) But if your equity gets to 20% (no matter what the original purchase price was), you are able to cancel PMI (for a loan that after July 1999).

Do your homework

Review your statements often. Find out the prices of other homes in your neighborhood. If your loan is under five years old, chances are you haven’t paid down much principal – you have paid mostly interest.

Proof of Equity

At the point your equity has reached the magic number of twenty percent, you are not far away from getting rid of your PMI payments, once and for all. You will first tell your lender that you are asking to cancel your PMI. Your lender will request documentation that your equity is at 20 percent or above. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home’s equity and eligibility for PMI cancellation.