Canceling Private Mortgage Insurance
Although lending institutions have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance gets below 78% of the purchase price, they do not have to take similar action if the borrower's equity is more than 22%. (This law does not cover a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed past July '99), no matter the original price of purchase, when the equity reaches twenty percent.
Keep a record of payments
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Pay attention to the prices of other homes in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you likely haven't been able to pay a lot of the principal: you are paying mostly interest.
The Proof is in the Appraisal
As soon as your equity has reached the required twenty percent, you are not far away from canceling your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI payments. Next, you will be required to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
At Alternative Mortgage Group, we answer questions about PMI every day. Give us a call at 561-395-4264.