For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (The legal requirment does not apply to some higher risk mortgages.) However, if your equity rises to 20% (regardless of the original purchase price), you can cancel PMI (for a loan that past July 1999).
Familiarize yourself with your monthly statements to keep a running total of principal payments. Also be aware of the price that other homes are purchased for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't gone down much.
As soon as your equity has risen to the magic number of twenty percent, you are close to canceling your PMI payments, once and for all. You will first let your lender know that you are asking to cancel PMI. Lenders require paperwork verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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