Beginning in 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans closed after July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity gets to over twenty-two percent. (A number of "higher risk" mortgage loans are excluded.) The good news is that you can cancel your PMI yourself (for a loan that closed after July '99), without considering the original purchase price, once your equity gets to twenty percent.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Pay attention to the selling prices of other homes in your immediate area. If your mortgage is fewer than five years old, probably you haven't paid down much principal � it's been mostly interest.
Once you find you've achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. Call the lender to ask for cancellation of your Private Mortgage Insurance. Your lender will request documentation that your equity is at 20 percent or above. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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