Although lending institutions have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance dips under 78% of the price of purchase, they do not have to cancel automatically if the loan's equity is over 22%. (Some "higher risk" loans are not included.) However, you have the right to cancel PMI yourself (for mortgages closed after July 1999) once your equity gets to 20 percent, no matter the original purchase price.
Keep track of money going toward the principal. You'll want to keep track of the prices of the homes that sell in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't greatly reduced principal � you have paid mostly interest.
As soon as your equity has risen to the magic number of twenty percent, you are not far away from canceling your PMI payments, once and for all. Contact your mortgage lender to ask for cancellation of your PMI. The lending institution will require documentation that your equity is at 20 percent or above. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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