Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made after July of '99) goes beneath seventy-eight percent of the price of purchase, but not at the time the loan's equity reaches over twenty-two percent. (This law does not apply to some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a loan closing past July '99), regardless of the original purchase price, once your equity gets to twenty percent.
Keep track of your principal payments. Also keep track of how much other homes are being sold for in your neighborhood. If your loan is under five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
At the point you think you have reached 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will first let your lender know that you are requesting to cancel your PMI. Your lender will ask for documentation that your equity is high enough. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
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