Beginning in 1999, lenders have been obligated 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 gets to twenty-two percent or more. (There are some exceptions -like some loans considered 'high risk'.) But you can actually cancel PMI yourself (for loans made past July 1999) once your equity gets to 20 percent, no matter the original purchase price.
Familiarize yourself with your loan statements to keep your eye on principal payments. You'll want to stay aware of the the purchase prices of the homes that sell in your neighborhood. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal most likely hasn't lowered much.
When you find you have reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will first notify your lender that you are asking to cancel PMI. Lending institutions require paperwork verifying your eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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