While lenders have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance gets below 78% of the price of purchase, they do not have to cancel automatically if the borrower's equity is above 22%. (There are some exceptions -like some loans considered 'high risk'.) However, if your equity reaches 20% (regardless of the original price of purchase), you have the legal right to cancel your PMI (for a mortgage loan closed past July 1999).
Familiarize yourself with your monthly statements to keep your eye on principal payments. Make yourself aware of the prices of other homes in your immediate area. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can start the process of canceling PMI when you determine your equity has reached 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. The lending institution will ask for documentation that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably request one before they agree to cancel PMI.
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