Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan 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 gets to twenty-two percent or more. (This law does not cover certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a loan closing after July '99), no matter the original purchase price, at the point the equity reaches twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to be aware of the the purchase amounts 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.
As soon as your equity has risen to the required twenty percent, you are not far away from getting rid of your PMI payments, for the life of your loan. Contact your lender to request cancellation of PMI. Lenders ask for documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they'll cancel PMI.
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