For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets under 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (Certain "higher risk" loan programs are excluded.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed after July '99), no matter the original purchase price, when the equity gets to twenty percent.
Keep track of your principal payments. Make yourself aware of the selling prices of other homes in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't gone down much.
You can start the process of PMI cancelation at the time you determine your equity has risen to 20%. You will first notify your lender that you are asking to cancel your PMI. Then you will be asked to verify that you are eligible to cancel. You can acquire proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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