Beginning in 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans made after July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity reaches higher than twenty-two percent. (Certain "higher risk" morgages are not included.) But you can actually cancel PMI yourself (for mortgages made past July 1999) when your equity reaches 20 percent, without consideration of the original purchase price.
Keep track of money going toward the principal. Pay attention to the selling prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage - five years or under, you probably haven't begun to pay very much of the principal: you have been paying mostly interest.
At the point you determine you have reached 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to contact the mortgage lender to let them know that you wish to cancel PMI. Your lender will require documentation that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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