Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of '99) reaches less than seventy-eight percent of the purchase price, but not at the point the loan's equity climbs to twenty-two percent or higher. (The legal obligation does not cover certain higher risk mortgages.) However, if your equity reaches 20% (no matter what the original purchase price was), you can cancel PMI (for a loan closed past July 1999).
Study your mortgage statements often. Also stay aware of how much other homes are being sold for in your neighborhood. You've been paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't lowered much.
Once your equity has risen to the magic number of twenty percent, you are just a few steps away from canceling your PMI payments, for the life of your loan. Call the lending institution to ask for cancellation of your Private Mortgage Insurance. The lending institution will request documentation that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably request one before they agree to cancel PMI.
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