While lending institutions have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the balance goes below 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is above 22%. (Certain "higher risk" mortgage loans are not included.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), no matter the original price of purchase, once your equity climbs to twenty percent.
Analyze your monthly statements often. Pay attention to the prices of other houses in your immediate area. Unfortunately, if you have a new loan - five years or fewer, you likely haven't begun to pay a lot of the principal: you are paying mostly interest.
When you find you have reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will first let your lending institution know that you are requesting to cancel your PMI. Lenders request proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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