Goodbye, PMI!

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Beginning in 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan closed past July of that year) goes down below seventy-eight percent of the purchase price, but not when the borrower's equity reaches over twenty-two percent. (This law does not include some higher risk mortgages.) But if your equity gets to 20% (no matter what the original purchase price was), you have the right to cancel PMI (for a mortgage that after July 1999).

Keep a running total of payments

Keep track of each principal payment. Also be aware of how much other homes are selling for in your neighborhood. Unfortunately, if yours is a recent loan - five years or under, you probably haven't begun to pay very much of the principal: you have been paying mostly interest.

Verify Eligibility

At the point you find you've reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to call your mortgage lender to let them know that you wish to cancel PMI. Lending institutions ask for documentation verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.

At Megastar Financial - Anita Martinez-Trumm, we answer questions about PMI every day. Call us: 303-596-8672.