Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed past July of '99) reaches less than seventy-eight percent of the purchase price, but not when the loan's equity climbs to twenty-two percent or higher. (Certain "higher risk" loans are not included.) But you have the right to cancel PMI yourself (for mortgage loans made past July 1999) at the point your equity gets to 20 percent, no matter the original purchase price.
Study your monthly statements often. You'll want to stay aware of the the purchase prices of the houses that are selling around you. If your loan is under five years old, probably you haven't paid down much principal � it's been mostly interest.
You can start the process of canceling your PMI when you you think that your equity has risen to 20%. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be asked to verify that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and almost all lenders require one before they agree to cancel.
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