For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls under 78 percent of the purchase price � but not at the point the borrower achieves 22 percent equity. (Some "higher risk" loans are not included.) But you are able to cancel PMI yourself (for mortgages made after July 1999) once your equity reaches 20 percent, no matter the original purchase price.
Keep a running total of payments
Familiarize yourself with your monthly statements to keep your eye on principal payments. Make yourself aware of the selling prices of other houses in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or under, you likely haven't begun to pay much of the principal: you have been paying mostly interest.
Verify Equity Amount
You can start the process of canceling PMI at the time you're sure your equity has risen to 20%. Contact the mortgage lender to ask for cancellation of your PMI. Lenders require paperwork verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and most lending institutions request one before they'll cancel PMI.
America's Money Source can answer questions about PMI and many others. Give us a call at (407) 898-7559.
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