Eliminating Private Mortgage Insurance
Although lending institutions have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets below 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is more than 22%. (There are some exceptions -like some loans considered 'high risk'.) However, if your equity gets to 20% (regardless of the original purchase price), you have the legal right to cancel PMI (for a mortgage loan closed past July 1999).
Keep a running total of payments
Analyze your monthly statements often. Also keep track of the price that other homes are purchased for in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you probably haven't begun to pay much of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
Once you determine you've reached 20 percent equity, you can start the process of freeing yourself from PMI payments. You will need to call the lender to alert them that you want to cancel PMI. Lenders request documentation verifying your eligibility at this point. Usually lenders ask for 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.
Family Mortgage Company of Hawaii, Inc. NMLS #244497 can answer questions about PMI and many others. Give us a call: (808) 935-0678.
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