For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (Some "higher risk" loan programs are not included.) But you are able to cancel PMI yourself (for mortgage loans closed past July 1999) at the point your equity gets to 20 percent, without consideration of the original purchase price.
Keep track of payments
Familiarize yourself with your mortgage statements to keep track of principal payments. Also keep track of what other homes are selling for in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't had a chance to pay a lot of the principal: you are paying mostly interest.
The Proof is in the Appraisal
At the point you determine you've reached 20 percent equity, you can begin the process of getting PMI out of your budget. You will need to call your mortgage lender to let them know that you wish to cancel PMI. The lending institution will require documentation that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and almost all lending institutions require one before they agree to cancel.
Contemporary Mortgage Services, Inc can answer questions about PMI and many others. Give us a call: 407-834-3377.
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