For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (Some "higher risk" loans are excluded.) But you are able to cancel PMI yourself (for mortgage loans closed past July 1999) once your equity rises to 20 percent, no matter the original purchase price.
Keep track of money going toward the principal. Also stay aware of how much other homes are selling for in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you probably haven't begun to pay very much of the principal: you are paying mostly interest.
You can start the process of PMI cancelation as soon as you're sure your equity has reached 20%. First you will tell your lender that you are requesting to cancel your PMI. 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) is all the proof you need � and almost all lending institutions will require one before they'll cancel PMI.
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