While lending institutions have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance dips under 78% of the purchase price, they do not have to cancel PMI automatically if the equity is over 22%. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for a loan closing past July '99), without considering the original purchase price, after your equity reaches twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. Pay attention to the prices of other houses in your immediate area. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't had a chance to pay much of the principal: you are paying mostly interest.
When you find you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. First you will tell your lender that you are requesting to cancel your PMI. Your lender will request documentation that your equity is at 20 percent or above. You can acquire documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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