Since 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed past July of that year) goes down below seventy-eight percent of the price of purchase, but not when the borrower's equity reaches twenty-two percent or more. (The legal requirment does not apply to a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing after July '99), regardless of the original price of purchase, when your equity climbs to twenty percent.
Familiarize yourself with your monthly statements to keep a running total of principal payments. Also stay aware of how much other homes are being sold for in your neighborhood. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.
Once you think you've reached 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. You will first let your lender know that you are requesting to cancel your PMI. Then you will be asked to verify that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel PMI.
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