Although lenders have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance goes below 78% of the price of purchase, they do not have to cancel automatically if the loan's equity is over 22%. (The legal requirment does not include a number of higher risk mortgages.) But if your equity rises to 20% (regardless of the original purchase price), you have the right to cancel your PMI (for a mortgage closed past July 1999).
Keep a running total of your principal payments. Also keep track of the price that other homes are being sold for in your neighborhood. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
Once you think you've reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to contact your lending institution to alert them that you want to cancel PMI. Lenders request proof of eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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