Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed after July of '99) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity reaches more than twenty-two percent. (This law does not apply to certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed after July '99), without considering the original price of purchase, once your equity rises to twenty percent.
Study your statements often. Also stay aware of what other homes are selling for in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal most likely hasn't lowered much.
You can begin the process of canceling your PMI at the time you're sure your equity has risen to 20%. You will first tell your lender that you are requesting to cancel your PMI. Your lender will require proof that your equity is high enough. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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