While lenders have been legally obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets under 78% of the price of purchase, they do not have to cancel automatically if the equity is above 22%. (A number of "higher risk" morgages are excluded.) However, you can actually cancel PMI yourself (for loans made past July 1999) when your equity gets to 20 percent, regardless of the original price of purchase.
Analyze your loan statements often. Also be aware of what other homes are selling for in your neighborhood. You are paying mostly interest if you closed your loan fewer than 5 years ago, so your principal probably hasn't lowered much.
As soon as your equity has risen to the required twenty percent, you are close to canceling your PMI payments, for the life of your loan. You will need to notify your mortgage lender that you wish to cancel PMI payments. Then you will be asked to verify that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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