Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed past July of that year) reaches less than seventy-eight percent of the purchase price, but not at the point the loan's equity gets to over twenty-two percent. (A number of "higher risk" loans are not included.) The good news is that you can request cancelation of your PMI yourself (for a loan closing after July '99), regardless of the original purchase price, when the equity reaches twenty percent.
Keep a running total of money going toward the principal. You'll want to be aware of the the purchase amounts of the homes that sell around you. If your loan is fewer than five years old, it's likely you haven't made much progress with the principal � you have been paying mostly interest.
You can start the process of canceling PMI at the time you determine your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI payments. Your lender will require documentation that your equity is at 20 percent or above. Usually 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 canceling PMI.
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