Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans made past July of that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity climbs to over twenty-two percent. (The legal requirment does not apply to a number of higher risk mortgages.) However, if your equity rises to 20% (no matter what the original purchase price was), you are able to cancel PMI (for a mortgage loan that past July 1999).
Familiarize yourself with your monthly statements to keep your eye on principal payments. Make yourself aware of the purchase prices of other homes in your neighborhood. Unfortunately, if yours is a new mortgage - five years or under, you likely haven't been able to pay very much of the principal: you are paying mostly interest.
You can start the process of canceling PMI at the time you calculate that your equity has risen to 20%. Call your mortgage lender to request cancellation of your PMI. Then you will be asked to submit proof that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and most lenders will require one before they agree to cancel.
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