Eliminating Private Mortgage Insurance

Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans closed after July of '99) goes under seventy-eight percent of the price of purchase, but not when the loan's equity reaches twenty-two percent or higher. (This legal requirment does not include certain higher risk mortgages.) However, if your equity reaches 20% (regardless of the original price of purchase), you can cancel PMI (for a mortgage that after July 1999).

Do your homework

Analyze your statements often. Find out the selling prices of other homes in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or under, you likely haven't begun to pay a lot of the principal: you have been paying mostly interest.

Verify Eligibility

You can start the process of canceling PMI as soon as you you think that your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI payments. Lending institutions ask for paperwork verifying your eligibility at this point. 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 PMI cancellation.

At Alerus Mortgage, we answer questions about PMI every day. Call us: 952 417 8481.

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