Beginning in 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan made after July of '99) reaches less than seventy-eight percent of the purchase price, but not at the point the loan's equity reaches twenty-two percent or more. (This law does not cover a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), without considering the original purchase price, after the equity rises to twenty percent.
Keep track of your principal payments. Also keep track of what other homes are selling for in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't paid down much principal � you have paid mostly interest.
You can start the process of canceling your PMI as soon as you calculate that your equity has risen to 20%. Call the lender to ask for cancellation of your PMI. Then you will be required to verify that you have at least 20 percent equity. You can get documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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