While lending institutions have been obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the balance goes below 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is over 22%. (Some "higher risk" mortgage loans are excluded.) The good news is that you can cancel your PMI yourself (for a mortgage loan that closed after July '99), no matter the original price of purchase, at the point your equity rises to twenty percent.
Familiarize yourself with your monthly statements to keep track of principal payments. Pay attention to the purchase prices of other homes in your immediate area. If your loan is fewer than five years old, probably you haven't greatly reduced principal � you have been paying mostly interest.
At the point you find you have achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will first tell your lender that you are requesting to cancel PMI. The lending institution will request proof that your equity is high enough. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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