While lending institutions have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance gets under 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is above 22%. (A number of "higher risk" mortgages are excluded.) However, you have the right to cancel PMI yourself (for mortgages closed after July 1999) when your equity rises to 20 percent, regardless of the original price of purchase.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also be aware of how much other homes are being sold for in your neighborhood. Unfortunately, if you have a new mortgage - five years or under, you likely haven't been able to pay a lot of the principal: you are paying mostly interest.
Once your equity has risen to the desired twenty percent, you are close to stopping your PMI payments, for the life of your loan. You will need to notify your mortgage lender that you want to cancel PMI. Next, you will be asked to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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