Canceling Private Mortgage Insurance

Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made past July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity reaches twenty-two percent or higher. (Some "higher risk" mortgage loans are not included.) But you are able to cancel PMI yourself (for loans closed past July 1999) once your equity gets to 20 percent, regardless of the original purchase price.

Do your homework

Keep track of your principal payments. You'll want to be aware of the the purchase amounts of the homes that sell around you. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.

The Proof is in the Appraisal

When you determine you have reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. Call your lending institution to request cancellation of PMI. 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), required by most lending institutions before canceling PMI.

Farm Credit of the Virginias can answer questions about PMI and many others. Call us at (800) 919-3276.