For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (Certain "higher risk" loan programs are not included.) But if your equity gets to 20% (regardless of the original purchase price), you have the right to cancel your PMI (for a mortgage closed after July 1999).
Familiarize yourself with your monthly statements to keep a running total of principal payments. Find out the purchase prices of other homes in your neighborhood. Unfortunately, if yours is a new loan - five years or under, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
You can start the process of PMI cancelation as soon as you determine your equity reaches 20%. You will need to call your lending institution to alert them that you want to cancel PMI payments. Lenders ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lending institutions will require one before they agree to cancel PMI.
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