For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (Certain "higher risk" loans are excluded.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan that closed after July '99), without considering the original price of purchase, at the point the equity reaches twenty percent.
Keep track of money going toward the principal. Also stay aware of how much other homes are selling for in your neighborhood. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can begin the process of canceling your PMI at the time you you think that your equity has risen to 20%. First you will notify your lender that you are asking to cancel your PMI. Your lender will require documentation that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and almost all lending institutions request one before they'll cancel PMI.
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