Although lending institutions have been obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance dips under 78% of the price of purchase, they do not have to cancel automatically if the equity is more than 22%. (Some "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), no matter the original price of purchase, when the equity gets to twenty percent.
Familiarize yourself with your monthly statements to keep track of principal payments. Pay attention to the purchase prices of other homes in your neighborhood. Unfortunately, if you have 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.
Once you determine you have reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. Call the lender to ask for cancellation of PMI. Next, you will be asked to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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