Since 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed after July of that year) goes down below seventy-eight percent of the purchase price, but not when the loan's equity gets to twenty-two percent or more. (This legal requirment does not cover a number of higher risk mortgages.) However, if your equity rises to 20% (no matter what the original price was), you have the legal right to cancel PMI (for a mortgage loan closed after July 1999).
Analyze your mortgage statements often. Make yourself aware of the selling prices of other homes 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.
Once your equity has reached the desired twenty percent, you are close to stopping your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI. Your lender will ask for proof that your equity is at 20 percent or above. Usually 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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