Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan made past July of '99) goes down below seventy-eight percent of the purchase price, but not when the loan's equity gets to twenty-two percent or higher. (Certain "higher risk" loans are excluded.) The good news is that you can cancel your PMI yourself (for your loan that closed past July '99), no matter the original price of purchase, at the point your equity climbs to twenty percent.
Keep a running total of each principal payment. Find out the prices of other houses in your neighborhood. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.
At the point you think you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. First you will tell your lender that you are requesting to cancel PMI. Then you will be asked to submit documentation that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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