While lenders have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance goes under 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is above 22%. (There are some exceptions -like some loans considered 'high risk'.) However, if your equity reaches 20% (no matter what the original price was), you are able to cancel PMI (for a loan that past July 1999).
Familiarize yourself with your mortgage statements to keep track of principal payments. Also keep track of the price that other homes are purchased for in your neighborhood. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
When you think you've reached 20 percent equity in your home, you can start the process of getting PMI out of your budget. You will first notify your lender that you are requesting to cancel your PMI. Lending institutions require proof of eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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