Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of '99) goes under seventy-eight percent of the price of purchase, but not at the time the borrower's equity reaches higher than twenty-two percent. (This law does not include a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a loan that closed past July '99), no matter the original price of purchase, once your equity climbs to twenty percent.
Study your mortgage statements often. You'll want to stay aware of the the purchase prices of the houses that are selling around you. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
At the point you find you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you want to cancel PMI. The lending institution will request documentation that your equity is at 20 percent or above. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
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