Since 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed after July of that year) reaches less than seventy-eight percent of the purchase price, but not when the loan's equity reaches higher than twenty-two percent. (There are some exceptions -like certain "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed after July '99), regardless of the original purchase price, once your equity gets to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also be aware of what other homes are being sold for in your neighborhood. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't lowered much.
You can start the process of PMI cancelation as soon as you're sure your equity has reached 20%. Call your mortgage lender to ask for cancellation of your PMI. Next, you will be asked to verify that you have at least 20 percent equity. Usually 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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