Beginning in 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed past July of '99) goes below seventy-eight percent of the purchase price, but not at the point the borrower's equity reaches more than twenty-two percent. (There are some exceptions -like certain "high risk' loans.) The good news is that you can cancel your PMI yourself (for your loan that closed after July '99), without considering the original price of purchase, when the equity climbs to twenty percent.
Analyze your monthly statements often. Make yourself aware of the purchase prices of other houses in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't paid down much principal � it's been mostly interest.
At the point you determine you've reached 20 percent equity in your home, you can start the process of canceling your Private Mortgage Insurance. First you will notify your lender that you are asking to cancel your PMI. Next, you will be asked to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably require one before they agree to cancel PMI.
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