Although lending institutions have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance gets under 78% of the price of purchase, they do not have to take similar action if the borrower's equity is more than 22%. (There are some loans that are excluded -like a number of "high risk' loans.) The good news is that you can cancel your PMI yourself (for a mortgage loan that closed after July '99), regardless of the original purchase price, after your equity reaches twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. Pay attention to the purchase prices of other homes in your immediate area. You've been paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.
At the point your equity has reached the magic number of twenty percent, you are close to stopping your PMI payments, for the life of your loan. Call the lender to ask for cancellation of PMI. Your lender will request proof that your equity is high enough. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.
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