Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed past July of that year) goes beneath seventy-eight percent of the price of purchase, but not when the borrower's equity reaches higher than twenty-two percent. (A number of "higher risk" loans are not included.) The good news is that you can cancel your PMI yourself (for your loan that closed past July '99), without considering the original price of purchase, at the point your equity rises to twenty percent.
Keep track of money going toward the principal. Also be aware of what other homes are being sold for in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you probably haven't been able to pay much of the principal: you are paying mostly interest.
At the point you determine you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. You will need to notify your mortgage lender that you want to cancel PMI. Your lender will require documentation that your equity is at 20 percent or above. You can get documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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