Since 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of '99) goes below seventy-eight percent of the price of purchase, but not when the loan's equity climbs to more than twenty-two percent. (There are exceptions -like some loans considered 'high risk'.) But you can actually cancel PMI yourself (for mortgage loans closed past July 1999) when your equity rises to 20 percent, regardless of the original price of purchase.
Keep a running total of money going toward the principal. Also keep track of the price that other homes are being sold 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 lowered much.
You can begin the process of PMI cancelation at the time you you think that your equity has risen to 20%. First you will notify your lender that you are asking to cancel your PMI. Next, you will be asked to verify that you are eligible to cancel. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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