Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed past July of '99) goes down below seventy-eight percent of the price of purchase, but not when the loan's equity reaches over twenty-two percent. (The legal requirment does not apply to some higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your loan closing after July '99), no matter the original price of purchase, after the equity rises to twenty percent.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Also stay aware of how much other homes are purchased for in your neighborhood. Unfortunately, if you have a new mortgage - five years or fewer, you probably haven't been able to pay very much of the principal: you are paying mostly interest.
At the point you find you have achieved at least 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will need to contact your lender to alert them that you want to cancel PMI payments. Your lender will require proof that your equity is at 20 percent or above. 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 request one before they agree to cancel PMI.
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