Beginning in 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan made past July of that year) goes down below seventy-eight percent of the purchase price, but not at the point the loan's equity reaches over twenty-two percent. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for your loan closing past July '99), without considering the original purchase price, when your equity gets to twenty percent.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Make yourself aware of the purchase prices of other houses in your immediate area. Unfortunately, if you have a recent mortgage - five years or fewer, you probably haven't started to pay much of the principal: you have been paying mostly interest.
Once you determine you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to call your mortgage lender to alert them that you wish to cancel PMI. The lending institution will request proof that your equity is high enough. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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