For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of your purchase price � but not when the borrower achieves 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for mortgages made past July 1999) once your equity reaches 20 percent, regardless of the original purchase price.
Keep track of money going toward the principal. Also be aware of how much other homes are being sold for in your neighborhood. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
Once your equity has risen to the magic number of twenty percent, you are not far away from getting rid of your PMI payments, for the life of your loan. You will need to call your mortgage lender to let them know that you wish to cancel PMI payments. Lending institutions require proof of eligibility at this point. You can get 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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