Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed after July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the loan's equity climbs to twenty-two percent or higher. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed after July '99), without considering the original purchase price, when your equity climbs to twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. Also keep track of the price that other homes are selling for in your neighborhood. If your loan is fewer than five years old, it's likely you haven't paid down much principal � you have been paying mostly interest.
At the point your equity has reached the required twenty percent, you are just a few steps away from getting rid of your PMI payments, once and for all. You will need to call the lender to alert them that you wish to cancel PMI payments. The lending institution will require proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and almost all lenders will require one before they agree to cancel PMI.
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