For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for a mortgage that closed after July '99), regardless of the original purchase price, at the point your equity rises to twenty percent.
Familiarize yourself with your loan statements to keep your eye on principal payments. Find out the purchase prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage loan - five years or under, you probably haven't started to pay very much of the principal: you are paying mostly interest.
As soon as your equity has reached the required twenty percent, you are not far away from canceling your PMI payments, once and for all. You will first tell your lender that you are requesting to cancel PMI. The lending institution will require proof that your equity is high enough. You can get documentation of your home's equity by getting 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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