Eliminating Private Mortgage Insurance
Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan made after July of '99) goes beneath seventy-eight percent of the purchase price, but not when the loan's equity reaches twenty-two percent or more. (There are exceptions -like certain "high risk' loans.) However, you can actually cancel PMI yourself (for mortgage loans made after July 1999) once your equity reaches 20 percent, regardless of the original price of purchase.
Verify the numbers
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to stay aware of the the purchase prices of the houses that are selling around you. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.
Proof of Equity
When you find you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. You will need to notify your mortgage lender that you wish to cancel PMI payments. Your lender will require documentation that your equity is high enough. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
Saab Mortgage can answer questions about PMI and many others. Give us a call: 703-288-0777.
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