Although lending institutions have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is over 22%. (This legal requirment does not apply to certain higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgages made past July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Review your statements often. Also keep track of what other homes are being sold for in your neighborhood. You are paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't gone down much.
Once your equity has risen to the magic number of twenty percent, you are not far away from stopping your PMI payments, for the life of your loan. Contact the lender to ask for cancellation of PMI. Your lender will ask for proof that your equity is high enough. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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