For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of your purchase price � but not at the point the borrower earns 22 percent equity. (Certain "higher risk" mortgage loans are excluded.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing after July '99), regardless of the original price of purchase, at the point the equity rises to twenty percent.
Keep track of each principal payment. Make yourself aware of the selling prices of other homes in your neighborhood. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't gone down much.
You can start the process of PMI cancelation as soon as you're sure your equity has risen to 20%. Contact the mortgage lender to ask for cancellation of PMI. Then you will be required to submit proof that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and most lenders request one before they agree to cancel PMI.
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