While lending institutions have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes under 78% of the price of purchase, they do not have to take similar action if the borrower's equity is more than 22%. (This law does not apply to certain higher risk mortgages.) But if your equity reaches 20% (regardless of the original price of purchase), you are able to cancel the PMI (for a loan closed after July 1999).
Do your homework
Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to be aware of the prices of the homes that are selling around you. Unfortunately, if yours is a new mortgage loan - five years or fewer, you probably haven't begun to pay very much of the principal: you are paying mostly interest.
At the point you think you have reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. Call the lender to request cancellation of PMI. Lending institutions request documentation verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lenders will require one before they agree to cancel PMI.
Prime Capital Mortgage Corp can answer questions about PMI and many others. Give us a call at 248-644-1200.
Got a Question?
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.