While lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance goes below 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is over 22%. (This law does not include certain higher risk mortgages.) However, if your equity gets to 20% (no matter what the original purchase price was), you are able to cancel PMI (for a mortgage closed past July 1999).
Familiarize yourself with your loan statements to keep a running total of principal payments. Also be aware of the price that other homes are selling for in your neighborhood. Unfortunately, if yours is a new loan - five years or fewer, you probably haven't started to pay much of the principal: you have been paying mostly interest.
Once you think you have achieved at least 20 percent equity, you can begin the process of getting PMI out of your budget. You will first let your lending institution know that you are requesting to cancel your PMI. Then you will be required to submit documentation that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and your lender will probably request one before they agree to cancel.
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