Since 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans made after July of that year) reaches less than seventy-eight percent of the purchase price, but not at the time the loan's equity reaches twenty-two percent or higher. (This law does not apply to some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage loan that closed after July '99), without considering the original purchase price, after your equity gets to twenty percent.
Do your homework
Keep a running total of your principal payments. Also stay aware of what other homes are selling for in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't started to pay much of the principal: you have been paying mostly interest.
When you determine you have achieved at least 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will first tell your lender that you are asking to cancel your PMI. Lending institutions 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 equity and eligibility for PMI cancellation.
U.S.A. Lending, Inc. can help find out if you can eliminate your PMI. Call us: 305-967-7200.