Although lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets below 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is over 22%. (This legal requirment does not include certain higher risk mortgages.) However, if your equity gets to 20% (no matter what the original purchase price was), you have the right to cancel the PMI (for a mortgage loan that past July 1999).
Familiarize yourself with your monthly statements to keep your eye on principal payments. Also stay aware of how much other homes are purchased for in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't lowered much.
When you find you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. Contact the lender to request cancellation of PMI. Next, you will be required to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably request one before they agree to cancel PMI.
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