For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (Certain "higher risk" loans are excluded.) The good news is that you can request cancelation of your PMI yourself (for your loan closing after July '99), no matter the original price of purchase, after the equity reaches twenty percent.
Familiarize yourself with your monthly statements to keep a running total of principal payments. You'll want to be aware of the prices of the houses that sell around you. Unfortunately, if yours is a recent loan - five years or under, you likely haven't had a chance to pay much of the principal: you are paying mostly interest.
As soon as your equity has reached the desired twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. You will first tell your lender that you are requesting to cancel PMI. Your lender will request proof that your equity is at 20 percent or above. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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