For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (Some "higher risk" loan programs are excluded.) However, if your equity rises to 20% (no matter what the original price was), you have the legal right to cancel PMI (for a mortgage that past July 1999).
Do your homework
Familiarize yourself with your monthly statements to keep a running total of principal payments. Make yourself aware of the prices of other houses in your neighborhood. Unfortunately, if yours is a new mortgage - five years or under, you probably haven't started to pay very much of the principal: you are paying mostly interest.
Proof of Equity
You can start the process of canceling your PMI when you're sure your equity has risen to 20%. Call your lending institution to ask for cancellation of your PMI. Lenders require paperwork verifying your eligibility at this point. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
Longhorn Mortgage can answer questions about PMI and many others. Give us a call at 512-302-9410.
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