Although lending institutions have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the balance goes under 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is above 22%. (The legal requirment does not include some higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgage loans closed past July 1999) once your equity reaches 20 percent, regardless of the original price of purchase.
Study your mortgage statements often. You'll want to keep track of the prices of the homes that sell around you. If your loan is under five years old, probably you haven't paid down much principal � you have been paying mostly interest.
You can begin the process of PMI cancelation when you calculate that your equity has risen to 20%. You will first notify your lender that you are requesting to cancel PMI. Next, you will be asked to verify that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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