For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (This legal requirment does not include certain higher risk mortgages.) But if your equity rises to 20% (regardless of the original price of purchase), you have the right to cancel the PMI (for a mortgage loan that after July 1999).
Keep track of each principal payment. Pay attention to the selling prices of other homes in your neighborhood. If your loan is under five years old, chances are you haven't made much progress with the principal � you have paid mostly interest.
Once your equity has reached the magic number of twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will need to contact your mortgage lender to let them know that you wish to cancel PMI. Lending institutions ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably request one before they agree to cancel.
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