Since 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) reaches less than seventy-eight percent of the price of purchase, but not when the borrower's equity reaches twenty-two percent or higher. (This law does not include some higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgage loans made after July 1999) when your equity reaches 20 percent, no matter the original price of purchase.
Do your homework
Keep a running total of each principal payment. Make yourself aware of the prices of other homes in your immediate area. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
The Proof is in the Appraisal
You can start the process of canceling PMI when you determine your equity has reached 20%. First you will notify your lender that you are requesting to cancel PMI. Your lender will ask for documentation that your equity is at 20 percent or above. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
At Contemporary Mortgage Services, Inc, we answer questions about PMI every day. Give us a call: 407-834-3377.
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