While lending institutions have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the balance goes under 78% of the price of purchase, they do not have to cancel automatically if the borrower's equity is over 22%. (Some "higher risk" morgages are not included.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), regardless of the original purchase price, when the equity gets to twenty percent.
Review your loan statements often. Find out the prices of other homes in your immediate area. If your loan is under five years old, probably you haven't greatly reduced principal � you have been paying mostly interest.
At the point you think you've achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you want to cancel PMI. Next, you will be asked to submit proof that you are eligible to cancel. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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