For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase price � but not when the borrower earns 22 percent equity. (This legal requirment does not apply to some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), regardless of the original purchase price, when your equity gets to twenty percent.
Study your statements often. Pay attention to the purchase prices of other houses in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or under, you probably haven't had a chance to pay a lot of the principal: you are paying mostly interest.
You can start the process of canceling your PMI at the time you determine your equity reaches 20%. You will need to contact the mortgage lender to alert them that you want to cancel PMI. Lending institutions require proof of eligibility at this point. You can acquire proof of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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