Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans made after July of that year) goes under seventy-eight percent of the price of purchase, but not when the loan's equity reaches twenty-two percent or more. (This legal requirment does not cover a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed after July '99), no matter the original price of purchase, when your equity reaches twenty percent.
Analyze your statements often. You'll want to be aware of the prices of the houses that sell in your neighborhood. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't lowered much.
At the point you think you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. Contact your mortgage lender to request cancellation of PMI. Then you will be asked to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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