Canceling Private Mortgage Insurance

Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made past July of '99) goes below seventy-eight percent of the purchase price, but not at the time the borrower's equity climbs to higher than twenty-two percent. (Certain "higher risk" loans are excluded.) However, if your equity gets to 20% (no matter what the original price was), you have the right to cancel your PMI (for a mortgage closed after July 1999).

Do your homework

Familiarize yourself with your loan statements to keep a running total of principal payments. Also stay aware of how much other homes are being sold for in your neighborhood. If your loan is under five years old, probably you haven't greatly reduced principal � you have paid mostly interest.

Proof of Equity

At the point you think you have achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. Contact the lending institution to ask for cancellation of your Private Mortgage Insurance. Lending institutions ask for proof of eligibility at this point. You can get documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.

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

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