Eliminate Private Mortgage Insurance (PMI)
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This only applies to conventional mortgages and FHA MI is for the life of the loan.
While lenders have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the balance gets under 78% of the price of purchase, they do not have to take similar action if the borrower’s equity is more than 22%. (There are some exceptions -like some loans considered ‘high risk’.) The good news is that you can cancel your PMI yourself (for a loan that closed after July ’99), without considering the original price of purchase, at the point your equity climbs to twenty percent.
Verify the numbers
Review your monthly statements often. You’ll want to be aware of the the purchase amounts of the homes that are selling in your neighborhood. If your loan is fewer than five years old, it’s likely you haven’t paid down much principal – it’s been mostly interest.
The Proof is in the Appraisal
Once your equity has reached the magic number of twenty percent, you are not far away from stopping your PMI payments, once and for all. You will first let your lending institution know that you are asking to cancel your PMI. The lending institution will ask for proof that your equity is at 20 percent or above. A state certified appraisal documented on the appropriate form (URAR-1004 – Uniform Residential Appraisal Report) will document your equity amount – and your lender will probably require one before they agree to cancel.
At Mortgage Maestro Group, we answer questions about PMI every day. Call us: (303) 779-0591.