For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not when the borrower achieves 22 percent equity. (There are some exceptions -like a number of "high risk' loans.) However, if your equity reaches 20% (no matter what the original price was), you have the legal right to cancel your PMI (for a mortgage loan closed past July 1999).
Keep a running total of your principal payments. Make yourself aware of the selling prices of other homes in your neighborhood. If your loan is fewer than five years old, probably you haven't greatly reduced principal � you have been paying mostly interest.
You can begin the process of PMI cancelation as soon as you calculate that your equity has reached 20%. Call your lending institution to request cancellation of your Private Mortgage Insurance. Lenders ask for documentation 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 PMI cancellation.
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