Beginning in 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans made after July of that year) goes down below seventy-eight percent of the purchase price, but not at the time the borrower's equity reaches twenty-two percent or more. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) But you can actually cancel PMI yourself (for mortgages made past July 1999) once your equity rises to 20 percent, without consideration of the original price of purchase.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Make yourself aware of the purchase prices of other homes in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you probably haven't had a chance to pay very much of the principal: you are paying mostly interest.
Once you determine you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. Contact your lender to request cancellation of your PMI. Next, you will be asked to submit documentation 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 lending institutions before canceling PMI.
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