Canceling Private Mortgage Insurance

For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (The legal obligation does not apply to certain higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgages made past July 1999) at the point your equity rises to 20 percent, regardless of the original price of purchase.

Do your homework

Review your mortgage statements often. You'll want to be aware of the prices of the houses that are selling around you. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't lowered much.

Verify Equity Amount

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

At First Community Bank of Central Al., we answer questions about PMI every day. Call us at (334) 285-8850.

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