While lenders have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the balance goes below 78% of the price of purchase, they do not have to take similar action if the loan's equity is more than 22%. (Certain "higher risk" loans are not included.) However, if your equity gets to 20% (no matter what the original purchase price was), you can cancel the PMI (for a loan closed after July 1999).
Familiarize yourself with your monthly statements to keep track of principal payments. You'll want to stay aware of the the purchase amounts of the homes that are selling around you. If your mortgage is fewer than five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
As soon as your equity has risen to the magic number of twenty percent, you are close to stopping your PMI payments, once and for all. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lenders require proof of eligibility at this point. You can get documentation of your home's 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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