Canceling Private Mortgage Insurance
For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (The legal requirment does not apply to some higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan closing past July '99), regardless of the original price of purchase, once your equity reaches twenty percent.
Verify the numbers
Analyze your loan statements often. Also stay aware of what other homes are selling for in your neighborhood. If your mortgage is fewer than five years old, probably you haven't paid down much principal � you have paid mostly interest.
The Proof is in the Appraisal
At the point your equity has risen to the magic number of twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will first notify your lender that you are asking to cancel your PMI. Lenders ask for documentation verifying your eligibility at this point. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
At One Source Lending , we answer questions about PMI every day. Give us a call at 3032207500.