Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed after July of that year) goes beneath seventy-eight percent of the price of purchase, but not when the loan's equity gets to twenty-two percent or higher. (Some "higher risk" mortgage loans are not included.) However, you are able to cancel PMI yourself (for mortgages closed past July 1999) once your equity reaches 20 percent, without consideration of the original purchase price.
Familiarize yourself with your loan statements to keep a running total of principal payments. You'll want to keep track of the the purchase amounts of the homes that are selling in your neighborhood. Unfortunately, if you have a new mortgage - five years or under, you likely haven't had a chance to pay a lot 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 call your lending institution to let them know that you wish to cancel PMI payments. Your lender will request documentation that your equity is at 20 percent or above. The best proof there is can be found in 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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