Goodbye, PMI!
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For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase amount - but not at the point the loan reaches 22 percent equity. (There are some loans that are not covered by this law -like certain "high risk' loans.) The good news is that you can cancel your PMI yourself (for a mortgage closing past July '99), without considering the original price of purchase, once the equity reaches twenty percent.
Keep a record of payments
Familiarize yourself with your loan statements to keep track of principal payments. Make yourself aware of the purchase prices of other houses in your immediate area. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.
Verify Eligibility
You can begin the process of canceling your PMI when you determine your equity has reached 20%. You will need to notify your mortgage lender that you want to cancel PMI. Lending institutions ask for paperwork verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is - and almost all lenders request one before they agree to cancel PMI.
At Smart Mortgage & Investments, we answer questions about PMI every day. Give us a call: (818) 920-3522.