For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (The legal requirment does not apply to some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your loan closing past July '99), without considering the original price of purchase, at the point the equity reaches twenty percent.
Study your statements often. Also stay aware of how much other homes are being sold for in your neighborhood. If your mortgage is under five years old, it's likely you haven't paid down much principal � it's been mostly interest.
At the point you determine you have achieved at least 20 percent equity, you can start the process of getting PMI out of your budget. You will need to notify your mortgage lender that you wish to cancel PMI payments. Next, you will be required to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and almost all lending institutions will require one before they agree to cancel PMI.
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