Beginning in 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans made past July of '99) goes down below seventy-eight percent of the price of purchase, but not at the time the borrower's equity reaches twenty-two percent or more. (The legal requirment does not cover a number of higher risk mortgages.) But you are able to cancel PMI yourself (for mortgage loans closed past July 1999) once your equity reaches 20 percent, no matter the original price of purchase.
Keep a running total of each principal payment. You'll want to stay aware of the prices of the homes that are selling around you. If your mortgage is fewer than five years old, chances are you haven't paid down much principal � it's been mostly interest.
You can start the process of PMI cancelation as soon as you calculate that your equity reaches 20%. Contact the lender to request cancellation of your PMI. Lending institutions request proof of eligibility at this point. You can acquire documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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