For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of your purchase price � but not when the borrower achieves 22 percent equity. (A number of "higher risk" loans are not included.) The good news is that you can cancel your PMI yourself (for your loan that closed past July '99), without considering the original purchase price, when your equity reaches twenty percent.
Keep a running total of money going toward the principal. Pay attention to the selling prices of other homes in your neighborhood. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can start the process of canceling your PMI at the time you're sure your equity reaches 20%. Call your lender to ask for cancellation of your Private Mortgage Insurance. Then you will be required to verify that you are eligible to cancel. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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