Beginning in 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed past July of that year) goes under seventy-eight percent of the price of purchase, but not when the loan's equity climbs to twenty-two percent or higher. (Certain "higher risk" mortgages are excluded.) However, you have the right to cancel PMI yourself (for mortgage loans made after July 1999) when your equity gets to 20 percent, regardless of the original purchase price.
Familiarize yourself with your loan statements to keep track of principal payments. Also be aware of what other homes are being sold for in your neighborhood. If your loan is fewer than five years old, probably you haven't made much progress with the principal - you have paid mostly interest.
You can start the process of canceling your PMI as soon as you're sure your equity reaches 20%. First you will let your lending institution know that you are asking to cancel your PMI. Then you will be asked to submit proof that you are eligible to cancel. Usually lenders require 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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