Eliminating Private Mortgage Insurance

While lending institutions have been legally obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the balance dips below 78% of the price of purchase, they do not have to take similar action if the borrower's equity is more than 22%. (The law does not apply to certain higher risk mortgages.) But if your equity rises to 20% (no matter what the original purchase price was), you have the right to cancel PMI (for a mortgage loan closed past July 1999).

Do your homework

Keep track of your principal payments. You'll want to stay aware of the the purchase amounts of the homes that are selling around you. If your loan is under five years old, chances are you haven't greatly reduced principal � you have paid mostly interest.

Proof of Equity

You can start the process of PMI cancelation when you're sure your equity reaches 20%. You will need to contact the lending institution to alert them that you want to cancel PMI payments. Then you will be required to submit documentation that you have at least 20 percent equity. 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 canceling PMI.

At Norcal Capital Group, Inc, we answer questions about PMI every day. Give us a call at (650) 689-5684.

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