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 that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity climbs to over twenty-two percent. (This legal obligation does not apply to a number of higher risk mortgages.) However, if your equity reaches 20% (no matter what the original purchase price was), you can cancel the PMI (for a mortgage closed past July 1999).
Analyze your mortgage statements often. Make yourself aware of the selling prices of other houses in your neighborhood. Unfortunately, if you have a new loan - five years or fewer, you likely haven't started to pay much of the principal: you have been paying mostly interest.
Once you determine you have achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will first tell your lender that you are asking to cancel your PMI. Lenders ask for documentation verifying your eligibility at this point. Most lenders require 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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