For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of the purchase price � but not when the borrower achieves 22 percent equity. (There are some exceptions -like a number of "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for a loan closing past July '99), without considering the original purchase price, once your equity rises to twenty percent.
Do your homework
Review your statements often. You'll want to be aware of the the purchase prices of the homes that are selling around you. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
The Proof is in the Appraisal
At the point you think you've achieved at least 20 percent equity, you can start the process of getting PMI out of your budget. You will need to contact your lender to let them know that you want to cancel PMI. Your lender will require proof that your equity is high enough. You can get proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
At Ward Kilduff Mortgage, we answer questions about PMI every day. Give us a call at (860) 658-7100.
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