Although lenders have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance goes below 78% of the purchase price, they do not have to take similar action if the borrower's equity is above 22%. (The law does not cover some higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgage loans closed after July 1999) once your equity rises to 20 percent, regardless of the original purchase price.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Pay attention to the purchase prices of other homes in your neighborhood. If your loan is under five years old, it's likely you haven't greatly reduced principal � you have paid mostly interest.
When you determine you have achieved at least 20 percent equity in your home, you can start the process of canceling your Private Mortgage Insurance. You will need to contact your lending institution to alert them that you wish to cancel PMI payments. Lenders ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and your lender will probably request one before they agree to cancel.
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