While lending institutions have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the balance gets below 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is more than 22%. (The legal requirment does not cover some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage that closed past July '99), regardless of the original purchase price, when the equity reaches twenty percent.
Keep a running total of your principal payments. You'll want to stay aware of the the purchase prices of the homes that are selling around you. Unfortunately, if yours is a recent loan - five years or under, you probably haven't had a chance to pay a lot of the principal: you have been paying mostly interest.
At the point your equity has risen to the required twenty percent, you are close to stopping your PMI payments, once and for all. Contact your lender to ask for cancellation of PMI. Next, you will be asked to submit documentation that you have at least 20 percent equity. You can get documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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