Since 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan closed after July of '99) goes below seventy-eight percent of the price of purchase, but not at the time the loan's equity reaches over twenty-two percent. (There are some exceptions -like some loans considered 'high risk'.) However, you are able to cancel PMI yourself (for mortgage loans closed after July 1999) at the point your equity gets to 20 percent, regardless of the original purchase price.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to keep track of the the purchase prices of the homes that are selling in your neighborhood. Unfortunately, if you have a recent loan - five years or under, you likely haven't begun to pay very much of the principal: you are paying mostly interest.
At the point your equity has risen to the required twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. You will first let your lender know that you are requesting to cancel your PMI. Lenders request paperwork verifying your eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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