Make Private Mortgage Insurance a Thing of the Past

For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance 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 a number of higher risk mortgages.) However, you have the right to cancel PMI yourself (for loans made after July 1999) when your equity rises to 20 percent, without consideration of the original price of purchase.

Keep a running total of payments

Keep a running total of money going toward the principal. Make yourself aware of the selling prices of other houses in your immediate area. Unfortunately, if yours is a new loan - five years or fewer, you likely haven't been able to pay much of the principal: you are paying mostly interest.

Verify Equity Amount

At the point you determine you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. Contact your mortgage lender to request cancellation of your Private Mortgage Insurance. The lending institution will ask for documentation that your equity is at 20 percent or above. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.

At Hawk Mortgage Group, we answer questions about PMI every day. Call us at (443) 619-7900.

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