For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls lower than 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (This law does not cover some higher risk mortgages.) However, you are able to cancel PMI yourself (for loans closed after July 1999) when your equity gets to 20 percent, without consideration of the original price of purchase.
Do your homework
Keep track of your principal payments. Also stay aware of what other homes are purchased for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't paid down much principal � you have been paying mostly interest.
Proof of Equity
You can begin the process of PMI cancelation when you're sure your equity has reached 20%. You will need to notify your mortgage lender that you want to cancel PMI. Lending institutions ask for documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably request one before they agree to cancel PMI.
At Crown Mortgage, we answer questions about PMI every day. Give us a call: (434) 975-5626.
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