For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for loans made after July 1999) when your equity reaches 20 percent, regardless of the original price of purchase.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also stay aware of what other homes are selling for in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't been reduced by much.
You can start the process of canceling your PMI when you calculate that your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI payments. Lending institutions request proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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