Although lenders have been required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance dips below 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is over 22%. (A number of "higher risk" loan programs are not included.) However, if your equity rises to 20% (no matter what the original purchase price was), you are able to cancel PMI (for a loan closed after July 1999).
Study your mortgage statements often. You'll want to stay aware of the the purchase amounts of the houses that sell around you. Unfortunately, if yours is a recent loan - five years or fewer, you probably haven't had a chance to pay very much of the principal: you have been paying mostly interest.
You can begin the process of canceling your PMI at the time you're sure your equity has risen to 20%. Call the lender to ask for cancellation of PMI. Lending institutions ask for paperwork verifying your eligibility at this point. You can get documentation of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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