Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans made after July of that year) goes down below seventy-eight percent of the purchase price, but not at the point the borrower's equity climbs to more than twenty-two percent. (This legal requirement does not cover certain higher risk mortgages.) However, if your equity gets to 20% (regardless of the original price of purchase), you can cancel PMI (for a loan that after July 1999).
Study your statements often. Also be aware 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 probably hasn't gone down much.
Once you determine you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. Contact your mortgage lender to request cancellation of your PMI. Lending institutions request documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need - and your lender will probably request one before they'll cancel PMI.
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