Beginning in 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made past July of that year) goes below seventy-eight percent of the price of purchase, but not when the borrower's equity reaches twenty-two percent or higher. (Some "higher risk" morgages are not included.) However, you have the right to cancel PMI yourself (for mortgage loans made past July 1999) once your equity rises to 20 percent, regardless of the original price of purchase.
Study your monthly statements often. Also be aware of how much other homes are being sold for in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you likely haven't had a chance to pay a lot of the principal: you have been paying mostly interest.
You can start the process of canceling PMI as soon as you're sure your equity has risen to 20%. You will first tell your lender that you are requesting to cancel your PMI. Lending institutions ask for proof of eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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