Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed after July of '99) goes under seventy-eight percent of the purchase price, but not when the borrower's equity gets to twenty-two percent or more. (This legal obligation does not cover certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), no matter the original purchase price, at the point the equity gets to twenty percent.
Verify the numbers
Familiarize yourself with your monthly statements to keep track of principal payments. Also keep track of what other homes are being sold for 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 lowered much.
Proof of Equity
Once your equity has risen to the required twenty percent, you are close to canceling your PMI payments, for the life of your loan. Call the lender to request cancellation of PMI. Then you will be required to verify that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
At Prime Capital Mortgage Corp, we answer questions about PMI every day. Call us: 248-644-1200.
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