While lenders have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the mortgage balance gets below 78% of the price of purchase, they do not have to take similar action if the loan's equity is more than 22%. (A number of "higher risk" loans are not included.) The good news is that you can cancel your PMI yourself (for your loan closing after July '99), no matter the original price of purchase, after the equity gets to twenty percent.
Keep a running total of money going toward the principal. Find out the purchase prices of other houses in your immediate area. If your mortgage is under five years old, chances are you haven't greatly reduced principal � you have been paying mostly interest.
When you determine you have reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. Call the lender to ask for cancellation of your PMI. Then you will be asked to verify that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and your lender will probably require one before they agree to cancel PMI.
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