Canceling Private Mortgage Insurance
For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (This legal obligation does not include certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a loan that closed after July '99), regardless of the original price of purchase, once your equity reaches twenty percent.
Verify the numbers
Keep a running total of each principal payment. Find out the selling prices of other homes in your neighborhood. Unfortunately, if yours is a new mortgage loan - five years or under, you likely haven't begun to pay very much of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
You can begin the process of PMI cancelation at the time you you think that your equity has risen to 20%. Call the lender to request cancellation of your Private Mortgage Insurance. Next, you will be required to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably require one before they agree to cancel.
At Coastal Mortgage Corp., we answer questions about PMI every day. Give us a call at 504-866-5626.
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