For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (This legal obligation does not apply to certain higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgage loans made after July 1999) at the point your equity gets to 20 percent, without consideration of the original purchase price.
Familiarize yourself with your mortgage statements to keep track of principal payments. Also keep track of how much 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 probably hasn't been reduced by much.
At the point you determine you've achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. Call the lending institution to ask for cancellation of PMI. Then you will be asked to verify that you are eligible to cancel. Usually 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 PMI cancellation.
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