Canceling Private Mortgage Insurance
For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of your purchase price � but not when the borrower earns 22 percent equity. (Certain "higher risk" loan programs are excluded.) But you have the right to cancel PMI yourself (for mortgage loans closed after July 1999) at the point your equity gets to 20 percent, regardless of the original price of purchase.
Do your homework
Keep track of money going toward the principal. You'll want to be aware of the prices of the houses that sell in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you probably haven't had a chance to pay a lot of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
When you find you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. You will need to call your lender to alert them that you wish to cancel PMI payments. Lenders request paperwork verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably require one before they agree to cancel.
America's Money Source can answer questions about PMI and many others. Call us: 4078987559.