Eliminating Private Mortgage Insurance
For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (The legal obligation does not apply to some higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgage loans made past July 1999) once your equity rises to 20 percent, regardless of the original price of purchase.
Do your homework
Keep track of your principal payments. You'll want to stay aware of the the purchase prices of the homes that are selling in your neighborhood. If your mortgage is under five years old, it's likely you haven't paid down much principal � you have been paying mostly interest.
You can start the process of PMI cancelation at the time you're sure your equity has risen to 20%. First you will tell your lender that you are asking to cancel your PMI. Lenders request proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and your lender will probably request one before they agree to cancel PMI.
Real Property Finance can answer questions about PMI and many others. Give us a call at 310-379-5997.
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