Although lending institutions have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance dips below 78% of the price of purchase, they do not have to take similar action if the loan's equity is above 22%. (Certain "higher risk" loans are excluded.) However, you are able to cancel PMI yourself (for mortgages made after July 1999) when your equity reaches 20 percent, no matter the original price of purchase.
Keep track of each principal payment. You'll want to be aware of the prices of the homes that are selling in your neighborhood. Unfortunately, if yours is a recent loan - five years or fewer, you probably haven't started to pay very much of the principal: you have been paying mostly interest.
You can start the process of PMI cancelation when you're sure your equity has risen to 20%. Contact the lender to request cancellation of your PMI. Then you will be required to submit documentation that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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