While lending institutions have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the balance goes under 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is more than 22%. (Some "higher risk" morgages are not included.) However, you are able to cancel PMI yourself (for loans made past July 1999) once your equity reaches 20 percent, no matter the original price of purchase.
Study your mortgage statements often. You'll want to be aware of the the purchase amounts of the houses that sell around you. Unfortunately, if you have a recent mortgage - five years or fewer, you probably haven't been able to pay a lot of the principal: you are paying mostly interest.
You can begin the process of canceling PMI as soon as you calculate that your equity has reached 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lending institutions request documentation verifying your eligibility at this point. You can get documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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