Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan made after July of '99) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity gets to over twenty-two percent. (There are exceptions -like some loans considered 'high risk'.) However, if your equity rises to 20% (regardless of the original price of purchase), you have the legal right to cancel PMI (for a mortgage loan closed past July 1999).
Familiarize yourself with your loan statements to keep a running total of principal payments. Make yourself aware of the prices of other homes in your neighborhood. Unfortunately, if you have a new mortgage - five years or under, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.
You can begin the process of canceling your PMI when you determine your equity reaches 20%. You will need to contact your lender to alert them that you wish to cancel PMI payments. Next, you will be asked to verify that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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