Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans made past July of '99) goes below seventy-eight percent of the price of purchase, but not at the time the loan's equity gets to twenty-two percent or higher. (Some "higher risk" loans are not included.) The good news is that you can request cancelation of your PMI yourself (for a loan closing after July '99), without considering the original price of purchase, once the equity reaches twenty percent.
Keep a running total of your principal payments. Also keep track of how much other homes are purchased 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 gone down much.
As soon as your equity has risen to the magic number of twenty percent, you are not far away from getting rid of your PMI payments, for the life of your loan. You will need to call your lender to let them know that you want to cancel PMI. Your lender will request proof that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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