Beginning in 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made after July of '99) goes below seventy-eight percent of the price of purchase, but not at the point the borrower's equity reaches over twenty-two percent. (Certain "higher risk" mortgage loans are excluded.) The good news is that you can cancel your PMI yourself (for a mortgage that closed past July '99), without considering the original price of purchase, after the equity climbs to twenty percent.
Analyze your statements often. You'll want to keep track of the the purchase prices of the houses that are selling around you. If your mortgage is fewer than five years old, chances are you haven't greatly reduced principal � you have paid mostly interest.
At the point you find you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will first tell your lender that you are requesting to cancel your PMI. Lenders request proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and most lenders will require one before they agree to cancel.
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