Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans closed after July of that year) goes beneath seventy-eight percent of the price of purchase, but not at the point the loan's equity reaches over twenty-two percent. (The legal requirment does not cover a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan closing past July '99), without considering the original purchase price, once the equity rises to twenty percent.
Keep track of each principal payment. Pay attention to the selling prices of other houses in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you probably haven't started to pay very much of the principal: you are paying mostly interest.
Once you find you have achieved at least 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. First you will let your lender know that you are requesting to cancel your PMI. Lending institutions request proof of eligibility at this point. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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