Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed past July of that year) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity climbs to twenty-two percent or more. (The legal requirment does not cover certain higher risk mortgages.) However, if your equity reaches 20% (no matter what the original purchase price was), you have the legal right to cancel your PMI (for a mortgage loan that after July 1999).
Review your statements often. Also be aware of how much other homes are purchased for in your neighborhood. If your mortgage is fewer than five years old, probably you haven't paid down much principal � you have paid mostly interest.
You can begin the process of PMI cancelation as soon as you're sure your equity has risen to 20%. First you will let your lending institution know that you are asking to cancel PMI. Then you will be asked to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and most lenders require one before they'll cancel PMI.
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