Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan made past July of that year) goes beneath seventy-eight percent of the price of purchase, but not when the borrower's equity gets to over twenty-two percent. (Some "higher risk" loans are not included.) However, if your equity reaches 20% (regardless of the original purchase price), you have the right to cancel your PMI (for a mortgage closed after July 1999).
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Find out the prices of other houses in your immediate area. Unfortunately, if yours is a recent mortgage - five years or fewer, you probably haven't begun to pay much of the principal: you have been paying mostly interest.
Once you think you've reached 20 percent equity, you can start the process of getting PMI out of your budget. You will need to notify your mortgage lender that you want to cancel PMI. Next, you will be asked to submit documentation that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lending institutions will require one before they agree to cancel.
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