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 under 78 percent of the purchase price � but not when the borrower achieves 22 percent equity. (This legal requirment does not cover a number of higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgages closed after July 1999) once your equity rises to 20 percent, no matter the original purchase price.
Keep track of your principal payments. Also keep track of how much other homes are selling for in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you probably haven't had a chance to pay very much of the principal: you are paying mostly interest.
You can start the process of PMI cancelation at the time you're sure your equity has reached 20%. You will first notify your lender that you are requesting to cancel PMI. Lenders require documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and almost all lending institutions require one before they agree to cancel.
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