For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase amount � but not when the borrower achieves 22 percent equity. (Some "higher risk" morgages are excluded.) But you can actually cancel PMI yourself (for mortgage loans closed past July 1999) once your equity gets to 20 percent, regardless of the original purchase price.
Familiarize yourself with your monthly statements to keep a running total of principal payments. Also keep track of the price that other homes are purchased for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.
You can start the process of PMI cancelation when you're sure your equity has reached 20%. Call the lending institution to ask for cancellation of your Private Mortgage Insurance. Then you will be asked to submit documentation that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and most lenders will require one before they agree to cancel PMI.
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