Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made past July of that year) goes under seventy-eight percent of the price of purchase, but not when the loan's equity reaches twenty-two percent or more. (This legal obligation does not include a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a loan closing past July '99), no matter the original purchase price, once the equity gets to twenty percent.
Keep a running total of each principal payment. Also stay aware of what other homes are purchased for in your neighborhood. Unfortunately, if you have a recent loan - five years or under, you likely haven't had a chance to pay a lot of the principal: you are paying mostly interest.
When you find you have achieved at least 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. You will need to call the lending institution to let them know that you wish to cancel PMI payments. Lending institutions require proof of eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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