Although lending institutions have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance dips under 78% of the purchase price, they do not have to cancel automatically if the equity is over 22%. (This legal requirment does not cover a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for loans closed after July 1999) when your equity reaches 20 percent, regardless of the original price of purchase.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to be aware of the the purchase amounts of the homes that sell in your neighborhood. You are paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't lowered much.
When you find you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. Contact the mortgage lender to ask for cancellation of your PMI. Your lender will require proof that your equity is at 20 percent or above. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.
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