Since 1999, lending institutions have been obligated 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 when the borrower's equity gets to twenty-two percent or higher. (There are exceptions -like certain "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan that closed past July '99), without considering the original price of purchase, after your equity rises to twenty percent.
Keep a running total of your principal payments. You'll want to stay aware of the the purchase prices of the homes that are selling in your neighborhood. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't been able to pay very much of the principal: you are paying mostly interest.
You can begin the process of canceling your PMI as soon as you you think that your equity has reached 20%. You will need to contact the lender to let them know that you wish to cancel PMI payments. The lending institution will ask for proof that your equity is at 20 percent or above. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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