For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (There are exceptions -like a number of "high risk' loans.) However, if your equity rises to 20% (no matter what the original price was), you have the right to cancel PMI (for a mortgage loan closed past July 1999).
Analyze your statements often. Also keep track of the price that other homes are selling for in your neighborhood. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can start the process of canceling your PMI at the time you're sure your equity has risen to 20%. You will need to call your lender to let them know that you wish to cancel PMI payments. Lending institutions require paperwork verifying your eligibility at this point. Most lenders require 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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