Although lenders have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance dips below 78% of the purchase price, they do not have to take similar action if the equity is above 22%. (There are some exceptions -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for mortgage loans closed after July 1999) when your equity reaches 20 percent, without consideration of the original price of purchase.
Keep track of your principal payments. You'll want to stay aware of the the purchase prices of the homes that are selling around you. If your mortgage is under five years old, chances are you haven't paid down much principal � you have been paying mostly interest.
You can start the process of PMI cancelation at the time you you think that your equity reaches 20%. First you will let your lender know that you are asking to cancel your PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they'll cancel PMI.
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