Although lending institutions have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the balance dips below 78% of the price of purchase, they do not have to cancel PMI automatically if the equity is more than 22%. (Certain "higher risk" morgages are excluded.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed after July '99), without considering the original purchase price, once your equity gets to twenty percent.
Study your monthly statements often. You'll want to keep track of the the purchase amounts of the houses that sell in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't greatly reduced principal � it's been mostly interest.
You can start the process of canceling PMI at the time you're sure your equity reaches 20%. Call the lender to request cancellation of PMI. Lenders require proof of eligibility at this point. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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