While lenders have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance gets under 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is above 22%. (The law does not cover some higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing past July '99), no matter the original purchase price, after your equity reaches twenty percent.
Verify the numbers
Keep track of your principal payments. Also keep track of how much other homes are purchased for in your neighborhood. Unfortunately, if you have a new mortgage - five years or under, you probably haven't started to pay a lot of the principal: you are paying mostly interest.
Proof of Equity
As soon as your equity has reached the magic number of twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. You will first let your lending institution know that you are asking to cancel your 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), which is required by most lending institutions before canceling PMI.
Ward Kilduff Mortgage can answer questions about PMI and many others. Call us at (860) 658-7100.
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