Beginning in 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made after July of '99) goes below seventy-eight percent of the price of purchase, but not when the borrower's equity reaches higher than twenty-two percent. (The law does not apply to certain higher risk mortgages.) However, if your equity reaches 20% (regardless of the original purchase price), you can cancel your PMI (for a loan that after July 1999).
Familiarize yourself with your monthly statements to keep your eye on principal payments. Make yourself aware of the purchase prices of other homes in your immediate area. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.
Once your equity has reached the required twenty percent, you are not far away from canceling your PMI payments, for the life of your loan. You will need to notify your mortgage lender that you want to cancel PMI payments. Lending institutions require proof of eligibility at this point. You can get documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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