Make Private Mortgage Insurance a Thing of the Past
For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (There are some exceptions -like certain "high risk' loans.) But if your equity rises to 20% (regardless of the original purchase price), you are able to cancel PMI (for a loan closed past July 1999).
Keep a record of payments
Familiarize yourself with your mortgage statements to keep track of principal payments. Also be aware of what other homes are purchased for in your neighborhood. You've been paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't been reduced by much.
Proof of Equity
At the point your equity has risen to the magic number of twenty percent, you are close to stopping your PMI payments, once and for all. You will first let your lender know that you are requesting to cancel your PMI. The lending institution will require proof that your equity is at 20 percent or above. You can get documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
At Financial Edge Mortgage Corp., we answer questions about PMI every day. Call us: 425-508-9988.
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