While lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance dips below 78% of the price of purchase, they do not have to cancel PMI automatically if the equity is above 22%. (A number of "higher risk" morgages are not included.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed after July '99), no matter the original purchase price, once your equity reaches twenty percent.
Study your monthly statements often. Also be aware of what other homes are selling for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
At the point you think you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will first let your lending institution know that you are requesting to cancel your PMI. Lenders ask for proof of eligibility at this point. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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