For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of the purchase amount � but not at the point the loan reaches 22 percent equity. (The legal obligation does not apply to a number of higher risk mortgages.) But if your equity rises to 20% (no matter what the original price was), you have the right to cancel PMI (for a mortgage loan that past July 1999).
Keep a running total of each principal payment. Also stay aware of what other homes are purchased for in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you likely haven't had a chance to pay very much of the principal: you have been paying mostly interest.
You can start the process of PMI cancelation as soon as you calculate that your equity reaches 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Your lender will require 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), required by most lending institutions before canceling PMI.
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