Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed after July of '99) goes down below seventy-eight percent of the price of purchase, but not when the loan's equity climbs to twenty-two percent or more. (The legal requirment does not cover a number of higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgage loans made past July 1999) once your equity gets to 20 percent, without consideration of the original purchase price.
Familiarize yourself with your loan statements to keep your eye on principal payments. Find out the purchase prices of other houses in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't had a chance to pay a lot of the principal: you have been paying mostly interest.
When you determine you've achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. First you will let your lending institution know that you are requesting to cancel PMI. Lenders ask for documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably request one before they agree to cancel PMI.
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