For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase amount � but not when the borrower achieves 22 percent equity. (This legal obligation does not apply to certain higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgage loans made past July 1999) at the point your equity gets to 20 percent, without consideration of the original price of purchase.
Keep a running total of payments
Familiarize yourself with your loan statements to keep a running total of principal payments. You'll want to stay aware of the the purchase amounts of the homes that sell around you. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't gone down much.
The Proof is in the Appraisal
At the point you find you have reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. Call your mortgage lender to ask for cancellation of PMI. Lenders require proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they'll cancel PMI.
At Financial Edge Mortgage Corp., we answer questions about PMI every day. Call us at 425-508-9988.
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