Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed past July of '99) goes beneath seventy-eight percent of the purchase price, but not at the point the loan's equity climbs to over twenty-two percent. (The legal obligation does not apply to a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage closing past July '99), no matter the original purchase price, when the equity climbs to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also be aware of what other homes are being sold for in your neighborhood. Unfortunately, if you have a recent loan - five years or under, you probably haven't begun to pay much of the principal: you have been paying mostly interest.
You can start the process of canceling PMI at the time you're sure your equity has reached 20%. You will need to call your lender to alert them that you wish to cancel PMI payments. Lending institutions request proof of 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 require one before they agree to cancel.
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