Since 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made after July of '99) reaches less than seventy-eight percent of the purchase price, but not at the point the borrower's equity climbs to twenty-two percent or higher. (The legal requirment does not cover a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your mortgage loan closing after July '99), without considering the original purchase price, at the point the equity rises to twenty percent.
Study your statements often. Also stay aware of how much other homes are being sold for in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.
At the point you find you have reached 20 percent equity, you can start the process of freeing yourself from PMI payments. First you will let your lender know that you are requesting to cancel your PMI. Lenders request paperwork verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and most lenders request one before they agree to cancel PMI.
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