While lending institutions have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance gets below 78% of the price of purchase, they do not have to take similar action if the loan's equity is above 22%. (This legal obligation does not include some higher risk mortgages.) However, you can actually cancel PMI yourself (for loans closed after July 1999) when your equity gets to 20 percent, no matter the original price of purchase.
Familiarize yourself with your loan statements to keep your eye on principal payments. Also be aware of what other homes are selling for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can begin the process of PMI cancelation at the time you determine your equity has reached 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. Next, you will be required to submit proof that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and almost all lenders will require one before they agree to cancel PMI.
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