Since 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed after July of that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity reaches higher than twenty-two percent. (Certain "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for your mortgage closing past July '99), regardless of the original price of purchase, when your equity gets to twenty percent.
Familiarize yourself with your mortgage statements to keep track of principal payments. Also stay aware of how much other homes are selling for in your neighborhood. Unfortunately, if yours is a new loan - five years or fewer, you probably haven't had a chance to pay a lot of the principal: you are paying mostly interest.
Once your equity has reached the magic number of twenty percent, you are just a few steps away from canceling your PMI payments, for the life of your loan. Call the mortgage lender to request cancellation of your Private Mortgage Insurance. Lending institutions ask for paperwork verifying your eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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