While lending institutions have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the loan balance goes under 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is above 22%. (Certain "higher risk" loans are excluded.) The good news is that you can cancel your PMI yourself (for your mortgage loan closing after July '99), without considering the original purchase price, when the equity rises to twenty percent.
Study your monthly statements often. Pay attention to the selling prices of other houses in your neighborhood. You are paying mostly interest if you closed your loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.
At the point your equity has risen to the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will first notify your lender that you are requesting to cancel PMI. Lenders ask for paperwork verifying your eligibility at this point. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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