Beginning in 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed after July of '99) goes beneath seventy-eight percent of the purchase price, but not at the time the borrower's equity gets to over twenty-two percent. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) But if your equity reaches 20% (no matter what the original purchase price was), you have the legal right to cancel the PMI (for a mortgage loan that after July 1999).
Review your monthly statements often. You'll want to be 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.
Once you think you have reached 20 percent equity in your home, you can start the process of getting PMI out of your budget. Contact the lending institution to ask for cancellation of your Private Mortgage Insurance. The lending institution will request documentation that your equity is high enough. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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