Since 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed past July of '99) reaches less than seventy-eight percent of the purchase price, but not when the loan's equity reaches over twenty-two percent. (Some "higher risk" mortgage loans are not included.) The good news is that you can request cancellation of your PMI yourself (for a mortgage closing past July '99), no matter the original purchase price, when your equity gets to twenty percent.
Familiarize yourself with your monthly statements to keep track of principal payments. Also be aware of how much 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 probably hasn't been reduced by much.
Once your equity has reached the required twenty percent, you are not far away from getting rid of your PMI payments, once and for all. You will first let your lending institution know that you are requesting to cancel PMI. Next, you will be asked to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is - and most lenders will require one before they'll cancel PMI.
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