Although lending institutions have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance gets below 78% of the price of purchase, they do not have to cancel automatically if the equity is more than 22%. (The legal obligation does not include certain higher risk mortgages.) However, if your equity rises to 20% (no matter what the original purchase price was), you can cancel your PMI (for a loan closed past July 1999).
Keep track of each principal payment. Also be aware of how much other homes are being sold for in your neighborhood. If your mortgage is under five years old, chances are you haven't made much progress with the principal - it's been mostly interest.
When you think you have reached 20 percent equity, you can begin the process of getting PMI out of your budget. Contact your lender to ask for cancellation of your PMI. Your lender will ask for documentation that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount - and most lending institutions require one before they agree to cancel PMI.
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