Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed past July of '99) goes down below seventy-eight percent of the price of purchase, but not when the loan's equity reaches over twenty-two percent. (Certain "higher risk" morgages are not included.) The good news is that you can cancel your PMI yourself (for your mortgage loan closing after July '99), no matter the original price of purchase, once the equity climbs to twenty percent.
Study your statements often. You'll want to stay aware of the the purchase prices of the homes that sell in your neighborhood. Unfortunately, if you have a recent mortgage - five years or fewer, you probably haven't been able to pay a lot of the principal: you have been paying mostly interest.
At the point your equity has risen to the required twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will need to call the lender to alert them that you wish to cancel PMI. The lending institution will ask for documentation that your equity is at 20 percent or above. You can get proof of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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