Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans made past July of that year) goes down below seventy-eight percent of the price of purchase, but not when the loan's equity gets to over twenty-two percent. (Certain "higher risk" loan programs are not included.) However, you can actually cancel PMI yourself (for mortgages closed past July 1999) when your equity reaches 20 percent, regardless of the original purchase price.
Analyze your loan statements often. Also keep track of what other homes are being sold for in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't gone down much.
As soon as your equity has reached the desired twenty percent, you are just a few steps away from canceling your PMI payments, for the life of your loan. First you will notify your lender that you are asking to cancel your PMI. Then you will be required to verify that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably request one before they'll cancel PMI.
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