While lenders have been legally required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance gets under 78% of the purchase price, they do not have to cancel PMI automatically if the equity is above 22%. (This legal obligation does not include some higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a loan closing after July '99), no matter the original purchase price, once your equity gets to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to keep track of the the purchase prices of the houses that sell around you. Unfortunately, if yours is a new mortgage - five years or under, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
As soon as your equity has risen to the magic number of twenty percent, you are just a few steps away from getting rid of your PMI payments, once and for all. You will need to notify your mortgage lender that you wish to cancel PMI payments. Next, you will be asked to submit proof that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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