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Eliminating PMI

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For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance reaches 78 percent of the original purchase price or appraised value (whichever was less when you originally purchased the home). This legal obligation may not include a number of higher risk mortgages. If your equity gets to 20% equity through appreciation or work done to your home (regardless of the original price of purchase), you may have the legal right to cancel PMI depending on some factors we cover below (for a mortgage closed past July 1999).

DO YOUR HOMEWORK

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

PROOF OF EQUITY

When you believe you have achieved at least 20 percent equity and have made the minimum required timely payments set by the lender, you can begin the process of canceling your Private Mortgage Insurance. First you will reach out to your lender and inform them of your request to cancel your PMI. Your lender will require proof your equity is at 20 percent or above in the form of an appraisal documented on the appropriate form (usually URAR-1004 - Uniform Residential Appraisal Report) which verifies your equity. Almost all lenders require one before they agree to cancel. You, as the homeowner, will be required to pay the cost of the appraisal.

Cha Mortgage Company can answer questions about PMI and many others. Give us a call at 503-753-7577.

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