Although lending institutions have been required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes below 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is more than 22%. (Some "higher risk" loan programs are excluded.) The good news is that you can request cancelation of your PMI yourself (for your loan closing after July '99), without considering the original price of purchase, at the point your equity rises to twenty percent.
Familiarize yourself with your monthly statements to keep track of principal payments. Also be aware of the price that other homes are purchased for in your neighborhood. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't lowered much.
When you find you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. First you will notify your lender that you are requesting to cancel your PMI. Lenders request documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and almost all lending institutions require one before they'll cancel PMI.
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