Although lending institutions have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance gets below 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is more than 22%. (There are some loans that are not included -like some loans considered 'high risk'.) However, you are able to cancel PMI yourself (for loans made after July 1999) when your equity reaches 20 percent, no matter the original purchase price.
Keep track of your principal payments. Also stay aware of how much other homes are purchased for in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't gone down much.
Once you think you've reached 20 percent equity, you can start the process of freeing yourself from PMI payments. You will need to call your lending institution to let them know that you wish to cancel PMI. Then you will be required to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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