Eliminating PMI - Sunset Mortgage Company

Eliminating Private Mortgage Insurance

For loans made after July 1999, federal law requires lenders to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase price — not when you achieve 22 percent equity, which will happen much more quickly with rising property values. (But beware - "higher risk" loans can and are excluded.) But you have the right to cancel PMI (for loans made after July 1999) once your equity reaches 20 percent, regardless of the original purchase price based on paying down an amortizing mortgage.

Keep track of your principal payments and make all your mortgage payments in timely fashion. A mortgage late payment may provide a lender the ability to reject eliminating your PMI payments, even if an appraisal shows you've now a 20%+ equity position in your property.

Keep track of what other homes are selling for in your neighborhood. If your loan is under five years old, chances are you haven't paid down much principal — it's been mostly interest. But property values in the Northwest have risen dramatically in the past few years. That can earn you 20 percent equity even if you haven't reduced the principal much.

When you think you've reached 20 percent equity in your home, we can begin the process of freeing yourself from PMI payments! You will need to notify your mortgage lender that you want to cancel PMI payments and you'll need to submit proof that you have at least 20 percent equity. A state certified appraisal on the appropriate form (URAR- 1004 uniform residential appraisal report for single family homes) is the best proof there is — and virtually all lenders require one before they'll cancel PMI.