While lending institutions have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the balance dips under 78% of the purchase price, they do not have to take similar action if the borrower's equity is above 22%. (There are some exceptions -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan that closed past July '99), regardless of the original price of purchase, at the point your equity climbs to twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. You'll want to be aware of the the purchase prices of the houses that sell around you. If your mortgage is under five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
When you think you have achieved at least 20 percent equity in your home, you can begin the process of getting PMI out of your budget. First you will let your lending institution know that you are asking to cancel your PMI. Next, you will be asked to verify that you are eligible to cancel. You can acquire documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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