Canceling Private Mortgage Insurance
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Beginning in 1999, lenders have been required to cancel a borrower’s Private Mortgage Insurance (PMI) when his loan balance (for a loan closed after July of that year) reaches less than seventy-eight percent of the price of purchase, but not when the loan’s equity climbs to twenty-two percent or higher. (There are some exceptions -like some loans considered ‘high risk’.) The good news is that you can cancel your PMI yourself (for a mortgage that closed after July ’99), no matter the original purchase price, after your equity climbs to twenty percent.
Keep track of payments
Keep a running total of your principal payments. Also be aware of the price that other homes are selling for in your neighborhood. You’ve been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn’t lowered much.
Verify Equity Amount
At the point you determine you’ve reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you wish to cancel PMI payments. Your lender will require proof that your equity is at 20 percent or above. 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.