Canceling Private Mortgage Insurance

Although lending institutions have been legally obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the balance gets under 78% of the purchase price, they do not have to cancel automatically if the equity is more than 22%. (Some "higher risk" loan programs are excluded.) However, 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 purchase price.

Keep a running total of payments

Familiarize yourself with your monthly statements to keep track of principal payments. You'll want to stay aware of the prices of the houses that are selling around you. If your loan is under five years old, it's likely you haven't greatly reduced principal � you have been paying mostly interest.

Verify Eligibility

Once you think you've achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lending institutions require proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.

First Community Bank of Central Al. can answer questions about PMI and many others. Call us at (334) 285-8850.

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