While lending institutions have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance dips under 78% of the purchase price, they do not have to take similar action if the borrower's equity is over 22%. (This legal obligation does not include a number of higher risk mortgages.) However, you can actually cancel PMI yourself (for loans made past July 1999) at the point your equity reaches 20 percent, no matter the original price of purchase.
Verify the numbers
Review your loan statements often. Also stay aware of what other homes are purchased for in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't paid down much principal � you have been paying mostly interest.
Proof of Equity
Once your equity has risen to the magic number of twenty percent, you are close to getting rid of your PMI payments, once and for all. First you will let your lender know that you are requesting to cancel your PMI. Lending institutions ask for documentation verifying your eligibility at this point. You can acquire documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
At Saab Mortgage, we answer questions about PMI every day. Call us: 703-288-0777.
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