Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed after July of that year) reaches less than seventy-eight percent of the purchase price, but not at the time the loan's equity reaches over twenty-two percent. (There are some loans that are excluded -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), regardless of the original price of purchase, once the equity reaches twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. Find out the prices of other homes in your immediate area. You've been paying mostly interest if your loan closed fewer than 5 years ago, so your principal probably hasn't been reduced by much.
You can begin the process of canceling PMI at the time you're sure your equity reaches 20%. First you will let your lender know that you are requesting to cancel PMI. Then you will be asked to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably request one before they'll cancel PMI.
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