Although lenders have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the balance dips under 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is more than 22%. (The law does not apply to a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgage loans closed after July 1999) when your equity rises to 20 percent, without consideration of the original price of purchase.
Study your statements often. Find out the purchase prices of other homes in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't paid down much principal � you have been paying mostly interest.
You can begin the process of canceling PMI as soon as you're sure your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI. Then you will be asked to verify that you have at least 20 percent equity. You can acquire documentation of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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