Beginning in 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed past July of '99) goes down below seventy-eight percent of the purchase price, but not at the point the loan's equity gets to twenty-two percent or higher. (There are some exceptions -like certain "high risk' loans.) The good news is that you can cancel your PMI yourself (for a loan closing after July '99), no matter the original purchase price, once the equity climbs to twenty percent.
Analyze your mortgage statements often. Also stay aware of how much other homes are selling for in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or fewer, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.
As soon as 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. First you will let your lender know that you are asking to cancel your PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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