Although lenders have been legally obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance gets below 78% of the purchase price, they do not have to cancel automatically if the loan's equity is over 22%. (Certain "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), regardless of the original purchase price, once your equity reaches twenty percent.
Study your mortgage statements often. You'll want to stay aware of the prices of the houses that are selling around you. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
As soon as your equity has risen to the required twenty percent, you are not far away from getting rid of your PMI payments, once and for all. You will first let your lender know that you are requesting to cancel your PMI. Your lender will ask for proof that your equity is at 20 percent or above. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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