For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of the purchase price � but not at the point the borrower achieves 22 percent equity. (This law does not apply to a number of 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 purchase price, after your equity reaches twenty percent.
Keep a record of payments
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to stay aware of the the purchase prices of the homes that are selling in your neighborhood. You've been paying mostly interest if your loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.
Once your equity has reached the required twenty percent, you are not far away from canceling your PMI payments, once and for all. You will need to contact your lending institution to alert them that you want to cancel PMI. Then you will be required to submit proof that you are eligible to cancel. 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 lenders before canceling PMI.
At Prime Capital Mortgage Corp, we answer questions about PMI every day. Call us: 248-644-1200.
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