Beginning in 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan made after July of that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity reaches over twenty-two percent. (A number of "higher risk" morgages are not included.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed after July '99), without considering the original price of purchase, once the equity climbs to twenty percent.
Familiarize yourself with your loan statements to keep track of principal payments. Also be aware of how much other homes are selling for in your neighborhood. If your mortgage is under five years old, chances are you haven't made much progress with the principal � it's been mostly interest.
You can begin the process of canceling your PMI at the time you you think that your equity has reached 20%. Call the lender to ask for cancellation of your Private Mortgage Insurance. Then you will be required to verify that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably request one before they agree to cancel PMI.
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