While lending institutions have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the balance gets under 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is over 22%. (The legal requirement does not include some higher risk mortgages.) The good news is that you can request cancellation of your PMI yourself (for a mortgage loan that closed after July '99), without considering the original price of purchase, once the equity reaches twenty percent.
Keep track of money going toward the principal. Make yourself aware of the prices of other houses in your neighborhood. Unfortunately, if yours is a recent loan - five years or fewer, you probably haven't begun to pay very much of the principal: you are paying mostly interest.
You can begin the process of canceling PMI as soon as you're sure your equity has reached 20%. You will first tell your lender that you are requesting to cancel PMI. Lending institutions require documentation verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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