Although lending institutions have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets under 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is more than 22%. (Some "higher risk" morgages are not included.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan closing past July '99), without considering the original purchase price, after the equity gets to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also be aware of the price that other homes are being sold for 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.
At the point you think 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 want to cancel PMI payments. Then you will be asked to submit proof that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and your lender will probably require one before they agree to cancel PMI.
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