Although lending institutions have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the balance gets below 78% of the purchase price, they do not have to cancel automatically if the loan's equity is above 22%. (There are exceptions -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for a mortgage closing after July '99), regardless of the original purchase price, once your equity climbs to twenty percent.
Familiarize yourself with your loan statements to keep track of principal payments. You'll want to be aware of the prices of the homes that sell around you. If your mortgage is fewer than five years old, it's likely you haven't paid down much principal � it's been mostly interest.
At the point you determine you have achieved at least 20 percent equity, you can start the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you wish to cancel PMI. Then you will be required to verify that you are eligible to cancel. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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