Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan made after July of that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity gets to more than twenty-two percent. (There are some loans that are not included -like some loans considered 'high risk'.) But if your equity reaches 20% (regardless of the original purchase price), you can cancel your PMI (for a loan closed after July 1999).
Keep track of your principal payments. You'll want to be aware of the prices of the homes that sell around you. If your loan is fewer than five years old, it's likely you haven't greatly reduced principal � you have been paying mostly interest.
When you find you've achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to contact your lender to alert them that you want to cancel PMI. Lenders ask for documentation verifying your eligibility at this point. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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