Canceling Private Mortgage Insurance
Although lending institutions have been obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets below 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is more than 22%. (This legal requirment does not apply to certain higher risk mortgages.) But you are able to cancel PMI yourself (for mortgage loans closed past July 1999) when your equity rises to 20 percent, without consideration of the original price of purchase.
Do your homework
Familiarize yourself with your loan statements to keep track of principal payments. Also stay aware of what other homes are purchased for in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you probably haven't been able to pay very much of the principal: you are paying mostly interest.
Verify Equity Amount
Once your equity has risen to the magic number of twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. Call the lender to request cancellation of your Private Mortgage Insurance. Next, you will be asked to submit documentation that you have at least 20 percent equity. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
At American Mortgage Advisers, Inc, we answer questions about PMI every day. Give us a call: 214-865-7442.
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