Canceling Private Mortgage Insurance

Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan closed past July of that year) reaches less than seventy-eight percent of the purchase price, but not at the point the loan's equity climbs to over twenty-two percent. (There are some exceptions -like certain "high risk' loans.) However, you have the right to cancel PMI yourself (for mortgages closed past July 1999) once your equity reaches 20 percent, no matter the original purchase price.

Do your homework

Analyze your statements often. You'll want to keep track of the the purchase amounts of the houses that sell in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't had a chance to pay much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

Once you think you have reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. First you will let your lender know that you are requesting to cancel your PMI. Next, you will be required to verify that you have at least 20 percent equity. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.

At Farm Credit of the Virginias, we answer questions about PMI every day. Give us a call: (800) 919-3276.