Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed past July of that year) goes down below seventy-eight percent of the price of purchase, but not when the loan's equity gets to more than twenty-two percent. (There are some loans that are excluded -like a number of "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed past July '99), without considering the original price of purchase, at the point your equity gets to twenty percent.
Review your statements often. Make yourself aware of the selling prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
You can begin the process of canceling your PMI at the time you calculate that your equity has risen to 20%. Call the lending institution to request cancellation of PMI. Then you will be required to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and most lending institutions will require one before they agree to cancel PMI.
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