Although lenders have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the balance goes below 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is above 22%. (This legal obligation does not include some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your mortgage loan that closed after July '99), regardless of the original purchase price, when your equity gets to twenty percent.
Review your statements often. Pay attention to the purchase prices of other homes in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't paid down much principal � you have paid mostly interest.
You can start the process of canceling PMI as soon as you calculate that your equity has reached 20%. Contact the lending institution to ask for cancellation of PMI. Lending institutions require proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably request one before they'll cancel PMI.
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