For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of the purchase amount � but not at the point the loan reaches 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) However, if your equity gets to 20% (no matter what the original price was), you can cancel the PMI (for a loan closed past July 1999).
Keep track of each principal payment. Find out the purchase prices of other homes in your neighborhood. If your loan is fewer than five years old, chances are you haven't paid down much principal � it's been mostly interest.
You can begin the process of PMI cancelation when you calculate that your equity has risen to 20%. Call your lender to ask for cancellation of your PMI. Your lender will ask for documentation that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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