Although lenders have been legally required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance goes below 78% of the purchase price, they do not have to cancel PMI automatically if the equity is more than 22%. (This legal obligation does not apply to certain higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgages made past July 1999) when your equity gets to 20 percent, regardless of the original purchase price.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Also keep track of how much other homes are purchased for in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you likely haven't been able to pay a lot of the principal: you have been paying mostly interest.
At the point your equity has reached the magic number of twenty percent, you are close to getting rid of your PMI payments, once and for all. You will need to notify your mortgage lender that you wish to cancel PMI. Then you will be asked to submit proof that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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