Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed after July of '99) goes under seventy-eight percent of the purchase price, but not at the time the loan's equity reaches twenty-two percent or higher. (There are some loans that are excluded -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for a mortgage closing past July '99), regardless of the original purchase price, once the equity gets to twenty percent.
Study your monthly statements often. You'll want to be aware of the the purchase prices of the homes that sell in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't started to pay much of the principal: you have been paying mostly interest.
You can start the process of canceling your PMI at the time you you think that your equity has reached 20%. You will need to call your lender to let them know that you wish to cancel PMI payments. Lenders request proof of eligibility at this point. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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