For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) But you are able to cancel PMI yourself (for mortgage loans closed past July 1999) when your equity gets to 20 percent, no matter the original purchase price.
Do your homework
Keep track of each principal payment. Also be aware of how much other homes are being sold for in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't made much progress with the principal � you have been paying mostly interest.
Proof of Equity
At the point your equity has reached the desired twenty percent, you are close to canceling your PMI payments, for the life of your loan. You will first tell your lender that you are asking to cancel your PMI. Then you will be required to verify that you have at least 20 percent equity. You can acquire proof of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
Tier One Mortgage, LLC can help find out if you can eliminate your PMI. Give us a call at (585) 282-0960.