For loans closed after July 1999, lending institutions are required (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. (The legal requirment does not cover certain higher risk mortgages.) However, you have the right to cancel PMI yourself (for mortgages made after July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Keep track of your principal payments. You'll want to stay aware of the the purchase prices of the homes that sell around you. If your mortgage is under five years old, probably you haven't paid down much principal � it's been mostly interest.
As soon as your equity has reached the desired twenty percent, you are close to stopping your PMI payments, for the life of your loan. You will need to call the lending institution to let them know that you want to cancel PMI payments. Next, you will be asked to submit documentation that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they'll cancel PMI.
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