Goodbye, PMI!

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Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of '99) reaches less than seventy-eight percent of the price of purchase, but not at the time the borrower's equity climbs to over twenty-two percent. (This law does not cover some higher risk mortgages.) But you can actually cancel PMI yourself (for mortgage loans made after July 1999) at the point your equity gets to 20 percent, regardless of the original price of purchase.

Keep a record of payments

Familiarize yourself with your monthly statements to keep track of principal payments. Find out the purchase prices of other houses in your immediate area. If your mortgage is under five years old, it's likely you haven't made much progress with the principal - you have paid mostly interest.

Proof of Equity

Once your equity has risen to the magic number of twenty percent, you are close to canceling your PMI payments, once and for all. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lending institutions require documentation verifying your eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

At Fairfax Mortgage Investments, we answer questions about PMI every day. Give us a call at 703-385-6122 #236.