Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed past July of '99) reaches less than seventy-eight percent of the price of purchase, but not at the point the loan's equity reaches higher than twenty-two percent. (The legal requirment does not include some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your mortgage loan that closed past July '99), regardless of the original purchase price, when your equity reaches twenty percent.
Verify the numbers
Keep track of your principal payments. You'll want to stay aware of the the purchase amounts of the homes that sell in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or under, you likely haven't begun to pay very much of the principal: you are paying mostly interest.
Proof of Equity
You can start the process of PMI cancelation when you you think that your equity has reached 20%. You will first tell your lender that you are asking to cancel your PMI. Your lender will request documentation that your equity is at 20 percent or above. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
At Carter Financial Solutions, we answer questions about PMI every day. Give us a call at 866-840-8745 x2.