Since 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed past July of that year) reaches less than seventy-eight percent of the purchase price, but not when the loan's equity gets to over twenty-two percent. (Some "higher risk" loans are not included.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), no matter the original price of purchase, when the equity reaches twenty percent.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to keep track of the the purchase amounts of the homes that are selling in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or fewer, you likely haven't started to pay much of the principal: you have been paying mostly interest.
As soon as your equity has risen to the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. Call your mortgage lender to ask for cancellation of your Private Mortgage Insurance. Then you will be asked to verify that you are eligible to cancel. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
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