Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed past July of that year) goes below seventy-eight percent of the purchase price, but not at the time the loan's equity climbs to over twenty-two percent. (Certain "higher risk" mortgages are excluded.) The good news is that you can cancel your PMI yourself (for a mortgage loan that closed past July '99), without considering the original purchase price, after your equity climbs to twenty percent.
Study your statements often. Also stay aware of how much other homes are selling for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.
You can start the process of canceling your PMI when you're sure your equity has reached 20%. First you will notify your lender that you are asking to cancel PMI. Lenders request documentation verifying your eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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