Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made after July of that year) reaches less than seventy-eight percent of the purchase price, but not at the time the loan's equity reaches twenty-two percent or more. (This legal obligation does not apply to certain 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 purchase price, once the equity rises to twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. Also be aware of what other homes are selling for in your neighborhood. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't been reduced by much.
Once your equity has risen to the magic number of twenty percent, you are close to stopping your PMI payments, once and for all. Call the mortgage lender to ask for cancellation of your PMI. The lending institution will ask for documentation that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and almost all lending institutions will require one before they agree to cancel PMI.
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