Although lending institutions have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes below 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is more than 22% of the value. (This law does not cover certain higher risk mortgages.) But if your equity rises to 20% (no matter what the original purchase price was), you have the legal right to request the lender to cancel your PMI. Keep a record of payments and make sure you do not have any late payments on the mortgage!
Study your mortgage statements often. You'll want to stay aware of the prices of the homes that sell around you. Unfortunately, if yours is a new mortgage - five years or fewer, you probably haven't begun to pay a lot of the principal: you have been paying mostly interest.
At the point your equity has risen to the magic number of twenty percent, you are not far away from getting rid of your PMI payments, for the life of your loan. First you will let your lending institution know that you are asking to cancel your PMI. Then you will be asked to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount - and almost all lending institutions will require one before they agree to cancel. Your lender will also FHA loans are now compelled to keep their mortgage insurance on the loan for the life of the loan. If you can avoid an FHA mortgage, it is worth investigating how to do so. Call me I will help you get into a conventional loan.
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