While lenders have been legally required (for loans closed past July ’99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance dips under 78% of the price of purchase, they do not have to take similar action if the borrower’s equity is more than 22%. (Some “higher risk” mortgages are not included.) The good news is that you can request cancellation of your PMI yourself (for a mortgage that closed after July ’99), no matter the original price of purchase, at the point your equity reaches twenty percent.
Keep a running total of money going toward the principal. You’ll want to stay aware of the purchase prices of the homes that are selling around you. If your mortgage is under five years old, probably you haven’t paid down much principal – it’s been mostly interest.
Once you find you have achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. You will need to call your lending institution to alert them that you wish to cancel PMI. Lenders require proof of eligibility at this point. 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 Bluestar Mortgage Inc., we answer questions about PMI every day.
Call us at 847-230-4030 or email us at email@example.com.