Canceling Private Mortgage Insurance

For loans closed since 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 when the loan reaches 22 percent equity. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for mortgages closed past July 1999) at the point your equity reaches 20 percent, no matter the original price of purchase.

Keep a record of payments

Keep a running total of your principal payments. Make yourself aware of the purchase prices of other houses in your neighborhood. Unfortunately, if you have a recent loan - five years or under, you probably haven't had a chance to pay very much of the principal: you have been paying mostly interest.

The Proof is in the Appraisal

As soon as your equity has reached the magic number of twenty percent, you are close to stopping your PMI payments, for the life of your loan. You will need to contact the lender to let them know that you want to cancel PMI payments. Lenders require paperwork verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably require one before they agree to cancel PMI.

Atlantic Financial Services can help find out if you can eliminate your PMI. Call us: (732) 969-9300.

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