Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed after July of '99) reaches less than seventy-eight percent of the purchase price, but not at the point the borrower's equity reaches over twenty-two percent. (This legal obligation does not cover some higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgages closed past July 1999) when your equity reaches 20 percent, regardless of the original purchase price.
Keep a running total of payments
Analyze your loan statements often. Make yourself aware of the selling prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.
At the point your equity has reached the desired twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. Call the mortgage lender to ask for cancellation of PMI. Next, you will be asked to verify that you are eligible to cancel. You can get documentation of your home's equity by getting a state certified appraisal using 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. Give us a call at 425-508-9988.
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