While lending institutions have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance gets below 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is above 22%. (There are some exceptions -like some loans considered 'high risk'.) However, you are able to cancel PMI yourself (for mortgages closed after July 1999) at the point your equity reaches 20 percent, without consideration of the original purchase price.
Do your homework
Familiarize yourself with your mortgage statements to keep a running total of principal payments. Also stay aware of the price that other homes are being sold for in your neighborhood. If your loan is fewer than five years old, it's likely you haven't paid down much principal � you have been paying mostly interest.
The Proof is in the Appraisal
Once you find you've reached 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you want to cancel PMI payments. The lending institution will request proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably require one before they agree to cancel.
Longhorn Mortgage can answer questions about PMI and many others. Give us a call: 512-302-9410.
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