Eliminating Private Mortgage Insurance
While lenders have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the balance dips under 78% of the purchase price, they do not have to cancel automatically if the loan's equity is above 22%. (The legal obligation does not cover some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a loan that closed after July '99), regardless of the original price of purchase, when your equity gets to twenty percent.
Verify the numbers
Keep a running total of your principal payments. You'll want to be aware of the the purchase amounts of the homes that are selling in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't been able to pay a lot of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
Once you find you have achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. First you will notify your lender that you are requesting to cancel PMI. Your lender will request documentation that your equity is at 20 percent or above. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
At Tier One Mortgage, LLC, we answer questions about PMI every day. Give us a call: (585) 282-0960.