For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of your purchase amount � but not at the point the borrower earns 22 percent equity. (This legal requirment does not include certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage that closed after July '99), regardless of the original purchase price, when your equity gets to twenty percent.
Keep a running total of your principal payments. Also be aware of what other homes are selling for in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't gone down much.
You can start the process of canceling your PMI as soon as you're sure your equity has risen to 20%. You will need to contact the lending institution to alert them that you wish to cancel PMI. Lending institutions request proof of eligibility at this point. You can acquire proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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