Beginning in 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made after July of that year) goes below seventy-eight percent of the purchase price, but not when the borrower's equity climbs to twenty-two percent or more. (This legal requirment does not cover a number of higher risk mortgages.) However, if your equity reaches 20% (regardless of the original purchase price), you have the right to cancel the PMI (for a mortgage closed past July 1999).
Keep a running total of each principal payment. Pay attention to the prices of other houses in your immediate area. 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.
You can start the process of canceling your PMI at the time you're sure your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Lenders ask for proof of eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.
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