Although lenders have been required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance dips under 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is above 22%. (This law does not cover a number of higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgages made past July 1999) when your equity rises to 20 percent, regardless of the original price of purchase.
Keep track of each principal payment. You'll want to keep track of the the purchase amounts of the homes that are selling in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't lowered much.
When you think you have reached 20 percent equity, you can start the process of getting PMI out of your budget. You will need to call your mortgage lender to let them know that you wish to cancel PMI payments. Next, you will be asked to verify that you are eligible to cancel. 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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