For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (There are exceptions -like certain "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan that closed after July '99), regardless of the original purchase price, after the equity reaches twenty percent.
Study your statements often. Also stay aware of the price that other homes are being sold for in your neighborhood. Unfortunately, if yours is a new mortgage - five years or under, you likely haven't been able to pay very much of the principal: you are paying mostly interest.
You can start the process of canceling your PMI at the time you determine your equity has reached 20%. You will need to contact your lending institution to let them know that you wish to cancel PMI. Next, you will be required to submit proof that you have at least 20 percent equity. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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