Eliminating Private Mortgage Insurance

For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (A number of "higher risk" loans are not included.) However, you have the right to cancel PMI yourself (for mortgages made past July 1999) once your equity gets to 20 percent, without consideration of the original purchase price.

Verify the numbers

Familiarize yourself with your monthly statements to keep your eye on principal payments. Pay attention to the selling prices of other homes in your neighborhood. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.

Proof of Equity

At the point you think you've achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. You will first let your lending institution know that you are requesting to cancel PMI. Lending institutions require documentation verifying your eligibility at this point. Usually lenders ask for 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 Family Mortgage Company of Hawaii, Inc. NMLS #244497, we answer questions about PMI every day. Give us a call at (808) 935-0678.