Canceling Private Mortgage Insurance
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While lending institutions have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance dips under 78% of the purchase price, they do not have to take similar action if the borrower's equity is over 22%. (The legal requirement does not apply to some higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgage loans closed past July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Keep a running total of payments
Study your statements often. Also keep track of the price that other homes are being sold for in your neighborhood. Unfortunately, if you have a new mortgage - five years or under, you likely haven't been able to pay a lot of the principal: you are paying mostly interest.
Proof of Equity
You can start the process of PMI cancellation at the time you you think that your equity reaches 20%. You will first notify your lender that you are asking to cancel your PMI. Next, you will be asked to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need - and your lender will probably request one before they'll cancel PMI.
Affordable Mortgage Financing, LLC. can help find out if you can eliminate your PMI. Call us: (608) 372-9222.