Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans made past July of '99) goes down below seventy-eight percent of the price of purchase, but not when the borrower's equity reaches more than twenty-two percent. (The law does not apply to a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage closing past July '99), without considering the original price of purchase, when your equity climbs to twenty percent.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to be aware of the the purchase prices of the homes that are selling in your neighborhood. Unfortunately, if yours is a recent loan - five years or under, you likely haven't been able to pay very much of the principal: you are paying mostly interest.
As soon as your equity has risen to the magic number of twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will first notify your lender that you are requesting to cancel your PMI. The lending institution will request documentation that your equity is at 20 percent or above. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.
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