For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of your purchase amount � but not at the point the borrower achieves 22 percent equity. (The legal obligation does not include some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a loan that closed after July '99), no matter the original price of purchase, once the equity climbs to twenty percent.
Familiarize yourself with your monthly statements to keep a running total of principal payments. Find out the prices of other houses in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't been reduced by much.
You can begin the process of canceling PMI when you determine your equity has reached 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Your lender will ask for proof that your equity is high enough. 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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