Eliminating Private Mortgage Insurance
While lenders have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the balance dips below 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is above 22%. (Some "higher risk" morgages are excluded.) However, you have the right to cancel PMI yourself (for mortgages closed past July 1999) when your equity gets to 20 percent, no matter the original purchase price.
Do your homework
Familiarize yourself with your monthly statements to keep your eye on principal payments. You'll want to be aware of the prices of the homes that are selling in your neighborhood. Unfortunately, if yours is a recent loan - five years or fewer, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
Once your equity has reached the desired twenty percent, you are close to canceling your PMI payments, for the life of your loan. Contact the lender to ask for cancellation of your PMI. Lenders request proof of eligibility at this point. You can acquire proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
At Contemporary Mortgage Services, Inc, we answer questions about PMI every day. Call us at 407-834-3377.
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