Although lending institutions have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the balance goes below 78% of the purchase price, they do not have to take similar action if the loan's equity is over 22%. (A number of "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for your loan that closed after July '99), without considering the original purchase price, when your equity rises to twenty percent.
Familiarize yourself with your monthly statements to keep a running total of principal payments. Pay attention to the purchase prices of other homes in your immediate area. Unfortunately, if you have a new mortgage loan - five years or fewer, you likely haven't begun to pay much of the principal: you have been paying mostly interest.
Once you determine you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. You will first let your lending institution know that you are requesting to cancel your PMI. Then you will be required to verify that you are eligible to cancel. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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