Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed after July of '99) reaches less than seventy-eight percent of the price of purchase, but not at the point the loan's equity gets to more than twenty-two percent. (A number of "higher risk" morgages are excluded.) However, you are able to cancel PMI yourself (for mortgages closed past July 1999) when your equity reaches 20 percent, regardless of the original price of purchase.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Find out the purchase prices of other homes in your neighborhood. Unfortunately, if you have a new mortgage - five years or fewer, you likely haven't had a chance to pay a lot of the principal: you are paying mostly interest.
You can start the process of canceling your PMI as soon as you you think that your equity has reached 20%. You will first notify your lender that you are asking to cancel PMI. Then you will be asked to verify that you are eligible to cancel. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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