Make Private Mortgage Insurance a Thing of the Past

For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (There are some exceptions -like a number of "high risk' loans.) However, you can actually cancel PMI yourself (for mortgage loans closed after July 1999) once your equity reaches 20 percent, no matter the original purchase price.

Keep a record of payments

Familiarize yourself with your monthly statements to keep track of principal payments. Pay attention to the prices of other houses in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't lowered much.

Verify Eligibility

At the point you think you have achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. You will need to call your mortgage lender to let them know that you wish to cancel PMI payments. The lending institution will require proof that your equity is high enough. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.

Family Mortgage Company of Hawaii, Inc. NMLS #244497 can answer questions about PMI and many others. Call us at (808) 935-0678.