Eliminating Private Mortgage Insurance

Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made past July of '99) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity climbs to twenty-two percent or more. (Some "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for your loan closing past July '99), no matter the original purchase price, at the point your equity climbs to twenty percent.

Verify the numbers

Familiarize yourself with your monthly statements to keep a running total of principal payments. Also keep track of what other homes are being sold for in your neighborhood. You've been paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal most likely hasn't gone down much.

Verify Equity Amount

At the point your equity has reached the magic number of twenty percent, you are close to stopping your PMI payments, for the life of your loan. You will need to notify your mortgage lender that you want to cancel PMI. Next, you will be asked to submit documentation that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At First Community Bank of Central Al., we answer questions about PMI every day. Give us a call: (334) 285-8850.

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