Beginning in 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made after July of that year) goes under seventy-eight percent of the price of purchase, but not when the borrower's equity reaches twenty-two percent or more. (The legal requirment does not cover certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage closing after July '99), without considering the original price of purchase, when the equity reaches twenty percent.
Analyze your mortgage statements often. Make yourself aware of the prices of other houses in your neighborhood. You are paying mostly interest if your loan closed fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
As soon as your equity has risen to the required twenty percent, you are close to getting rid of your PMI payments, once and for all. You will first let your lending institution know that you are requesting to cancel your PMI. Lenders require paperwork verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and most lending institutions will require one before they'll cancel PMI.
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