Since 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan closed after July of '99) goes down below seventy-eight percent of the price of purchase, but not at the time the borrower's equity reaches higher than twenty-two percent. (Some "higher risk" mortgage loans are excluded.) However, you have the right to cancel PMI yourself (for loans made past July 1999) at the point your equity rises to 20 percent, without consideration of the original price of purchase.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Find out the prices of other houses in your immediate area. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal probably hasn't lowered much.
At the point you find you've achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lending institutions ask for paperwork verifying your eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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