Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made past July of that year) reaches less than seventy-eight percent of the purchase price, but not at the time the borrower's equity climbs to over twenty-two percent. (A number of "higher risk" morgages are not included.) The good news is that you can cancel your PMI yourself (for your mortgage loan closing past July '99), no matter the original purchase price, once the equity climbs to twenty percent.
Familiarize yourself with your loan statements to keep track of principal payments. Make yourself aware of the selling prices of other houses in your immediate area. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
Once your equity has risen to the required twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. Call the lending institution to ask for cancellation of PMI. Lenders ask for documentation verifying your eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
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