Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans made past July of '99) reaches less than seventy-eight percent of the price of purchase, but not at the time the loan's equity climbs to twenty-two percent or higher. (A number of "higher risk" loan programs are not included.) However, you are able to cancel PMI yourself (for mortgage loans closed past July 1999) when your equity gets to 20 percent, no matter the original purchase price.
Keep a running total of money going toward the principal. Also keep track of what other homes are being sold for in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you probably haven't had a chance to pay very much of the principal: you have been paying mostly interest.
You can begin the process of PMI cancelation at the time you calculate that your equity reaches 20%. You will need to call the lending institution to let them know that you wish to cancel PMI. Next, you will be asked to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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