Although lenders have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance goes under 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is over 22%. (This law does not include a number of higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgages closed after July 1999) when your equity rises to 20 percent, without consideration of the original purchase price.
Familiarize yourself with your loan statements to keep your eye on principal payments. Also be aware of the price that other homes are being sold for in your neighborhood. You are paying mostly interest if your loan closed fewer than 5 years ago, so your principal most likely hasn't lowered much.
You can begin the process of canceling PMI when you determine your equity reaches 20%. You will first notify your lender that you are requesting to cancel your PMI. Lenders ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and your lender will probably require one before they agree to cancel.
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