Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans closed after July of '99) reaches less than seventy-eight percent of the purchase price, but not when the loan's equity reaches over twenty-two percent. (There are some exceptions -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for mortgage loans made past July 1999) once your equity rises to 20 percent, no matter the original purchase price.
Study your statements often. Also keep track of what other homes are being sold for in your neighborhood. Unfortunately, if yours is a new loan - five years or fewer, you probably haven't been able to pay much of the principal: you are paying mostly interest.
Once your equity has risen to the magic number of twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. You will need to contact your lender to let them know that you wish to cancel PMI. Your lender will ask for proof that your equity is at 20 percent or above. Most lenders ask for 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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