While lending institutions have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the balance goes under 78% of the purchase price, they do not have to cancel automatically if the loan's equity is over 22%. (This law does not apply to some higher risk mortgages.) However, you are able to cancel PMI yourself (for loans closed past July 1999) at the point your equity reaches 20 percent, no matter the original price of purchase.
Keep track of your principal payments. Also stay aware of what other homes are purchased for in your neighborhood. Unfortunately, if you have a recent mortgage - five years or fewer, you probably haven't had a chance to pay very much of the principal: you have been paying mostly interest.
You can start the process of PMI cancelation as soon as you you think that your equity reaches 20%. You will need to contact the mortgage lender to alert them that you wish to cancel PMI. Then you will be asked to verify that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lenders require one before they agree to cancel PMI.
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