While lending institutions have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the mortgage balance dips below 78% of the purchase price, they do not have to take similar action if the equity is above 22%. (There are some exceptions -like certain "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed after July '99), no matter the original purchase price, once the equity reaches twenty percent.
Keep a running total of each principal payment. Also stay aware of the price that other homes are being sold 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.
At the point you determine you've achieved at least 20 percent equity in your home, you can begin the process of getting PMI out of your budget. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lending institutions ask for proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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