While lending institutions have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance goes below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is above 22%. (This legal requirment does not apply to certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan that closed past July '99), without considering the original purchase price, at the point your equity reaches twenty percent.
Keep a running total of your principal payments. Also stay aware of the price that other homes are purchased for in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or fewer, you probably haven't begun to pay much of the principal: you have been paying mostly interest.
You can start the process of canceling your PMI as soon as you determine your equity has risen to 20%. Contact your mortgage lender to request cancellation of PMI. The lending institution will request documentation that your equity is at 20 percent or above. You can acquire proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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