Canceling Private Mortgage Insurance
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For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of the purchase amount - but not at the point the loan reaches 22 percent equity. (This legal obligation does not include certain higher risk mortgages.) The good news is that you can request cancellation of your PMI yourself (for your mortgage loan closing after July '99), no matter the original purchase price, after your equity reaches twenty percent.
Keep track of payments
Familiarize yourself with your monthly statements to keep a running total of principal payments. Find out the selling prices of other houses in your neighborhood. Unfortunately, if yours is a new loan - five years or under, you probably haven't begun to pay much of the principal: you are paying mostly interest.
As soon as your equity has reached the required twenty percent, you are close to canceling your PMI payments, for the life of your loan. You will need to contact your lender to let them know that you wish to cancel PMI. Your lender will ask for documentation that your equity is at 20 percent or above. You can acquire documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
At Carolina Equity Services, Inc., we answer questions about PMI every day. Call us: (919) 355-1034.