Since 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made after July of '99) goes down below seventy-eight percent of the price of purchase, but not when the borrower's equity reaches more than twenty-two percent. (A number of "higher risk" morgages are not included.) The good news is that you can cancel your PMI yourself (for a mortgage loan that closed past July '99), regardless of the original price of purchase, once the equity rises to twenty percent.
Familiarize yourself with your loan statements to keep your eye on principal payments. You'll want to keep track of the prices of the homes that are selling in your neighborhood. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can start the process of PMI cancelation when you determine your equity reaches 20%. First you will tell your lender that you are requesting to cancel PMI. Lending institutions request proof of eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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