Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed past July of '99) goes under seventy-eight percent of the purchase price, but not at the point the loan's equity climbs to twenty-two percent or higher. (Certain "higher risk" mortgage loans are not included.) But you can actually cancel PMI yourself (for mortgage loans closed after July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Study your statements often. You'll want to be aware of the the purchase prices of the houses that are selling around you. You've been paying mostly interest if your loan closed fewer than 5 years ago, so your principal most likely hasn't lowered much.
When you find you've reached 20 percent equity, you can begin the process of getting PMI out of your budget. You will first notify your lender that you are requesting to cancel PMI. Then you will be required to submit proof that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and almost all lenders require one before they agree to cancel PMI.
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