Since 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans closed past July of that year) goes beneath seventy-eight percent of the purchase price, but not at the time the borrower's equity reaches twenty-two percent or higher. (This legal obligation does not apply to a number of higher risk mortgages.) However, if your equity reaches 20% (regardless of the original purchase price), you are able to cancel PMI (for a loan closed after July 1999).
Keep track of money going toward the principal. Find out the selling prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage loan - five years or fewer, you probably haven't been able to pay very much of the principal: you are paying mostly interest.
At the point you think you have reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be required to verify that you are eligible to cancel. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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