Although lending institutions have been required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the balance dips below 78% of the purchase price, they do not have to take similar action if the loan's equity is above 22%. (This law does not apply to certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan closing after July '99), without considering the original purchase price, when the equity gets to twenty percent.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. Make yourself aware of the selling prices of other houses in your neighborhood. Unfortunately, if you have a new loan - five years or fewer, you likely haven't begun to pay very much of the principal: you are paying mostly interest.
You can start the process of PMI cancelation when you calculate that your equity has reached 20%. You will need to notify your mortgage lender that you want to cancel PMI. Lenders require proof of 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 canceling PMI.
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