For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of the purchase price - but not at the point the loan reaches 22 percent equity. (The legal obligation does not cover a number of higher risk mortgages.) But you are able to cancel PMI yourself (for loans closed after July 1999) once your equity reaches 20 percent, regardless of the original purchase price.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Also keep track of how much other homes are purchased for in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can begin the process of PMI cancellation at the time you calculate that your equity reaches 20%. Call your lender to ask for cancellation of your Private Mortgage Insurance. The lending institution will require proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is - and your lender will probably require one before they'll cancel PMI.
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