Make Private Mortgage Insurance a Thing of the Past

Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed past July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity gets to more than twenty-two percent. (This law does not include some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), regardless of the original price of purchase, after your equity climbs to twenty percent.

Do your homework

Familiarize yourself with your loan statements to keep a running total of principal payments. Find out the purchase prices of other homes in your immediate area. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.

Proof of Equity

At the point you determine you have achieved at least 20 percent equity in your home, you can begin the process of getting PMI out of your budget. You will need to contact your lender to alert them that you wish to cancel PMI payments. Your lender will ask for proof that your equity is at 20 percent or above. 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.

At Family Mortgage Company of Hawaii, Inc. NMLS #244497, we answer questions about PMI every day. Give us a call at (808) 935-0678.