Beginning in 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans closed after July of that year) reaches less than seventy-eight percent of the price of purchase, but not at the time the loan's equity gets to over twenty-two percent. (Some "higher risk" loans are excluded.) The good news is that you can cancel your PMI yourself (for your loan closing after July '99), regardless of the original price of purchase, when the equity reaches twenty percent.
Keep track of money going toward the principal. Pay attention to the selling prices of other houses in your immediate area. If your mortgage is under five years old, chances are you haven't paid down much principal � it's been mostly interest.
You can begin the process of PMI cancelation at the time you're sure your equity has risen to 20%. You will first let your lending institution know that you are asking to cancel PMI. The lending institution will require documentation that your equity is at 20 percent or above. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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