For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase amount - but not at the point the loan reaches 22 percent equity. (This legal obligation does not include a number of higher risk mortgages.) But if your equity gets to 20% (regardless of the original price of purchase), you have the legal right to cancel PMI (for a mortgage closed past July 1999).
Familiarize yourself with your monthly statements to keep your eye on principal payments. Pay attention to the prices of other houses in your neighborhood. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't gone down much.
When you find you have achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. First you will tell your lender that you are asking to cancel your PMI. Your lender will require documentation that your equity is at 20 percent or above. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount - and almost all lenders require one before they agree to cancel.
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