Since 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed after July of that year) goes below seventy-eight percent of the purchase price, but not when the borrower's equity reaches twenty-two percent or more. (There are some exceptions -like some loans considered 'high risk'.) But you have the right to cancel PMI yourself (for mortgage loans closed past July 1999) at the point your equity gets to 20 percent, no matter the original purchase price.
Do your homework
Familiarize yourself with your loan statements to keep your eye on principal payments. Find out the selling prices of other homes in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
The Proof is in the Appraisal
Once your equity has risen to the desired twenty percent, you are just a few steps away from getting rid of your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI. Then you will be asked to submit documentation that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and almost all lenders request one before they agree to cancel PMI.
At Carter Financial Solutions, we answer questions about PMI every day. Give us a call: 866-840-8745 x2.