Eliminating Private Mortgage Insurance
For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (The law does not include a number of higher risk mortgages.) But you can actually cancel PMI yourself (for loans closed after July 1999) once your equity gets to 20 percent, no matter the original price of purchase.
Keep a record of payments
Review your statements often. You'll want to keep track of the the purchase amounts of the houses that are selling around you. Unfortunately, if yours is a new mortgage loan - five years or under, you likely haven't been able to pay very much of the principal: you have been paying mostly interest.
Verify Equity Amount
You can begin the process of canceling your PMI at the time you you think that your equity has risen to 20%. Contact your mortgage lender to request cancellation of PMI. Then you will be required to verify that you are eligible to cancel. Most 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 Carter Financial Solutions, we answer questions about PMI every day. Call us: 866-840-8745 x2.