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Although lenders have been obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the balance dips below 78% of the purchase price, they do not have to cancel PMI automatically if the equity is over 22%. (Some "higher risk" loans are excluded.) But if your equity gets to 20% (no matter what the original price was), you have the right to cancel PMI (for a mortgage closed past July 1999).
Do your homework
Familiarize yourself with your monthly statements to keep a running total of principal payments. Also stay aware of what other homes are being sold for in your neighborhood. If your loan is under five years old, it's likely you haven't paid down much principal - it's been mostly interest.
Proof of Equity
Once you find you have reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. Contact the lending institution to request cancellation of PMI. The lending institution will request proof that your equity is high enough. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
The Ross Fund can answer questions about PMI and many others. Call us: (949) 533-5311.
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