While lenders have been required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance goes below 78% of the price of purchase, they do not have to take similar action if the loan's equity is more than 22%. (There are some exceptions -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), regardless of the original price of purchase, after the equity rises to twenty percent.
Keep track of your principal payments. You'll want to stay aware of the the purchase prices of the homes that sell in your neighborhood. If your mortgage is under five years old, probably you haven't greatly reduced principal � it's been mostly interest.
When you determine you've reached 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. First you will tell your lender that you are asking to cancel PMI. Lenders request proof of eligibility at this point. 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 lenders before canceling PMI.
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