Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan closed after July of that year) goes under seventy-eight percent of the purchase price, but not at the time the loan's equity reaches more than twenty-two percent. (Certain "higher risk" mortgage loans are not included.) The good news is that you can cancel your PMI yourself (for a loan that closed past July '99), without considering the original price of purchase, once your equity rises 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 mortgage loan - five years or fewer, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
You can begin the process of PMI cancelation as soon as you're sure your equity reaches 20%. Call your lender to ask for cancellation of PMI. Lending institutions require documentation verifying your eligibility at this point. You can acquire documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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