Although lending institutions have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance dips below 78% of the purchase price, they do not have to cancel automatically if the loan's equity is more than 22%. (Some "higher risk" morgages are excluded.) However, you are able to cancel PMI yourself (for loans closed after July 1999) at the point your equity gets to 20 percent, no matter the original price of purchase.
Keep track of money going toward the principal. Also stay aware of what other homes are purchased for in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you likely haven't had a chance to pay very much of the principal: you have been paying mostly interest.
You can begin the process of PMI cancelation as soon as you're sure your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lending institutions require documentation verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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