For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase price � but not at the point the borrower earns 22 percent equity. (There are some loans that are not included -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed after July '99), regardless of the original price of purchase, when your equity reaches twenty percent.
Keep a running total of your principal payments. Pay attention to the selling prices of other houses in your immediate area. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.
You can begin the process of canceling PMI as soon as you you think that your equity has risen to 20%. You will need to call the mortgage lender to alert them that you want to cancel PMI payments. Your lender will request proof that your equity is high enough. 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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