Although lending institutions have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance gets below 78% of the price of purchase, they do not have to cancel automatically if the loan's equity is more than 22%. (This legal obligation does not cover a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed past July '99), no matter the original purchase price, at the point your equity reaches twenty percent.
Study your statements often. Also be aware of how much other homes are purchased for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
When you determine you've reached 20 percent equity in your home, you can begin the process of getting PMI out of your budget. Contact your lending institution to request cancellation of PMI. Then you will be asked to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lending institutions will require one before they agree to cancel.
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