For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (There are some loans that are not included -like some loans considered 'high risk'.) But you are able to cancel PMI yourself (for loans closed past July 1999) once your equity reaches 20 percent, no matter the original price of purchase.
Familiarize yourself with your monthly statements to keep track of principal payments. You'll want to be aware of the prices of the homes that are selling in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal most likely hasn't gone down much.
As soon as your equity has risen to the required twenty percent, you are close to stopping your PMI payments, once and for all. You will need to contact the lender to let them know that you want to cancel PMI. Lenders ask for 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 verify your equity and eligibility for canceling PMI.
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