For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (This legal requirment does not include some higher risk mortgages.) But if your equity reaches 20% (regardless of the original price of purchase), you are able to cancel your PMI (for a mortgage loan that past July 1999).
Keep a running total of payments
Review your monthly statements often. Pay attention to the purchase prices of other houses in your immediate area. You are paying mostly interest if your loan closed fewer than 5 years ago, so your principal probably hasn't gone down much.
At the point you think you've achieved at least 20 percent equity, 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. Lenders ask for proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably request one before they'll cancel PMI.
At Real Property Finance, we answer questions about PMI every day. Give us a call at 310-379-5997.
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