Although lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the balance dips under 78% of the price of purchase, they do not have to cancel PMI automatically if the equity is above 22%. (There are exceptions -like a number of "high risk' loans.) However, if your equity rises to 20% (no matter what the original price was), you have the right to cancel the PMI (for a loan closed after July 1999).
Keep track of each principal payment. Also be aware of how much other homes are selling for in your neighborhood. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't gone down much.
When you think you've achieved at least 20 percent equity, you can start the process of freeing yourself from PMI payments. Call the mortgage lender to request cancellation of PMI. Next, you will be asked to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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