Beginning in 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed past July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the borrower's equity gets to higher than twenty-two percent. (Some "higher risk" loans are excluded.) The good news is that you can cancel your PMI yourself (for your mortgage that closed after July '99), no matter the original price of purchase, once the equity rises to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also keep track of how much other homes are selling for in your neighborhood. Unfortunately, if yours is a new loan - five years or under, you likely haven't started to pay a lot of the principal: you are paying mostly interest.
As soon as your equity has risen to the magic number of twenty percent, you are close to getting rid of your PMI payments, once and for all. First you will let your lender know that you are asking to cancel your PMI. The lending institution will ask for proof that your equity is high enough. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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