Although lending institutions have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance gets under 78% of the price of purchase, they do not have to take similar action if the equity is over 22%. (The legal requirement does not apply to some higher risk mortgages.) But you are able to cancel PMI yourself (for mortgages closed after July 1999) once your equity reaches 20 percent, regardless of the original purchase price.
Familiarize yourself with your monthly statements to keep track of principal payments. Also keep track of the price that other homes are selling for in your neighborhood. Unfortunately, if yours is a recent loan - five years or fewer, you probably haven't had a chance to pay much of the principal: you are paying mostly interest.
Once you find you've reached 20 percent equity, you can start the process of getting PMI out of your budget. You will need to contact the mortgage lender to alert them that you wish to cancel PMI payments. Then you will be required to verify that you have at least 20 percent equity. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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