While lenders have been legally obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance dips under 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is more than 22%. (There are some loans that are excluded -like some loans considered 'high risk'.) But you have the right to cancel PMI yourself (for loans closed past July 1999) once your equity gets to 20 percent, no matter the original price of purchase.
Keep a running total of your principal payments. Pay attention to the selling prices of other houses in your neighborhood. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't gone down much.
You can begin the process of canceling PMI as soon as you're sure your equity has risen to 20%. You will need to call your lender to alert them that you wish to cancel PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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