Since 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made past July of that year) goes below seventy-eight percent of the price of purchase, but not when the borrower's equity reaches higher than twenty-two percent. (This legal requirment does not apply to some higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgage loans closed after July 1999) when your equity reaches 20 percent, no matter the original price of purchase.
Keep track of your principal payments. You'll want to stay aware of the prices of the homes that are selling around you. If your loan is fewer than five years old, chances are you haven't greatly reduced principal � it's been mostly interest.
When you find you have reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. Contact the lending institution to request cancellation of your PMI. The lending institution will ask for proof that your equity is at 20 percent or above. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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