Since 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans made past July of '99) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity climbs to twenty-two percent or higher. (A number of "higher risk" morgages are not included.) But you are able to cancel PMI yourself (for mortgages closed after July 1999) when your equity reaches 20 percent, without consideration of the original purchase price.
Familiarize yourself with your loan statements to keep your eye on principal payments. Find out the prices of other homes in your immediate area. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't been able to pay much of the principal: you are paying mostly interest.
You can begin the process of canceling your PMI when you you think that your equity reaches 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lenders ask for 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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