Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan closed past July of that year) goes below seventy-eight percent of the purchase price, but not at the time the borrower's equity climbs to twenty-two percent or more. (There are exceptions -like certain "high risk' loans.) But if your equity reaches 20% (regardless of the original price of purchase), you can cancel PMI (for a mortgage closed past July 1999).
Analyze your mortgage statements often. You'll want to keep track of the the purchase prices of the houses that are selling in your neighborhood. Unfortunately, if yours is a new mortgage - five years or under, you probably haven't been able to pay very much of the principal: you have been paying mostly interest.
You can begin the process of PMI cancelation at the time you calculate that your equity has reached 20%. You will need to notify your mortgage lender that you want to cancel PMI. 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), which is required by most lenders before canceling PMI.
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