For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase price � but not when the borrower earns 22 percent equity. (A number of "higher risk" morgages are excluded.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan that closed past July '99), without considering the original price of purchase, once your equity gets to twenty percent.
Keep track of money going toward the principal. Make yourself aware of the prices of other houses in your neighborhood. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can start the process of PMI cancelation when you're sure your equity reaches 20%. First you will tell your lender that you are asking to cancel your PMI. Lenders request documentation verifying your eligibility at this point. You can acquire documentation of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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