For loans made 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 loan reaches 22 percent equity. (A number of "higher risk" loan programs are excluded.) The good news is that you can request cancelation of your PMI yourself (for a loan closing past July '99), without considering the original price of purchase, at the point your equity rises to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Make yourself aware of the selling prices of other homes in your immediate area. Unfortunately, if yours is a recent mortgage - five years or under, you probably haven't had a chance to pay very much of the principal: you have been paying mostly interest.
Once your equity has risen to the required twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. You will need to notify your mortgage lender that you wish to cancel PMI payments. Your lender will require proof that your equity is high enough. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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