Although lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the balance goes below 78% of the purchase price, they do not have to take similar action if the equity is over 22%. (Certain "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for your mortgage that closed after July '99), without considering the original purchase price, after the equity rises to twenty percent.
Study your statements often. Also be aware of the price that other homes are purchased for in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't started to pay much of the principal: you have been paying mostly interest.
You can start the process of PMI cancelation at the time you determine your equity reaches 20%. You will first tell your lender that you are requesting to cancel PMI. Then you will be asked to verify that you have at least 20 percent equity. You can acquire 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.
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