Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed past July of '99) goes down below seventy-eight percent of the price of purchase, but not at the point the loan's equity gets to higher than twenty-two percent. (There are exceptions -like some loans considered 'high risk'.) However, if your equity reaches 20% (no matter what the original price was), you can cancel the PMI (for a loan after July 1999).
Familiarize yourself with your monthly statements to keep track of principal payments. Pay attention to the purchase 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 gone down much.
As soon as your equity has risen to the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. Contact the lender to ask for the cancellation of PMI. Next, you will be asked to submit documentation that you have at least 20 percent equity. Usually, lenders require a state-certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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