Beginning in 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan made after July of that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity reaches over twenty-two percent. (Certain "higher risk" mortgage loans are not included.) The good news is that you can cancel your PMI yourself (for a loan closing past July '99), without considering the original purchase price, once the equity rises to twenty percent.
Study your loan statements often. Also keep track of what other homes are purchased for in your neighborhood. You are paying mostly interest if the closing was 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 close to canceling your PMI payments, once and for all. Call your lender to ask for cancellation of PMI. The lending institution will require documentation that your equity is at 20 percent or above. 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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