Beginning in 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan made past July of that year) reaches less than seventy-eight percent of the purchase price, but not when the loan's equity climbs to over twenty-two percent. (The legal obligation does not cover a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your loan closing after July '99), no matter the original purchase price, at the point your equity climbs to twenty percent.
Review your statements often. Also stay aware of how much other homes are purchased for 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 gone down much.
Once your equity has risen to the magic number of twenty percent, you are just a few steps away from canceling your PMI payments, for the life of your loan. First you will let your lending institution know that you are asking to cancel your PMI. Next, you will be required to verify that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need - and most lenders require one before they agree to cancel.
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