Although lenders have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance gets below 78% of the price of purchase, they do not have to cancel PMI automatically if the equity is over 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 that closed past July '99), no matter the original purchase price, when the equity climbs to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Find out the selling prices of other houses in your immediate area. Unfortunately, if you have a new mortgage loan - five years or under, you probably haven't started to pay a lot of the principal: you are paying mostly interest.
Once you find you've achieved at least 20 percent equity, you can start the process of getting PMI out of your budget. Contact your lending institution to request cancellation of your PMI. Lending institutions require proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and most lenders request one before they'll cancel PMI.
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