Although lenders have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes below 78% of the purchase price, they do not have to cancel automatically if the loan's equity is above 22%. (There are exceptions -like some loans considered 'high risk'.) But you have the right to cancel PMI yourself (for mortgages closed after July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Keep a record of payments
Study your loan statements often. Also be aware of how much other homes are selling for in your neighborhood. Unfortunately, if yours is a new loan - five years or fewer, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
Proof of Equity
You can begin the process of canceling your PMI as soon as you're sure your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be asked to verify that you are eligible to cancel. You can acquire documentation of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
At America's Money Source, we answer questions about PMI every day. Call us at (407) 898-7559.
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