For loans made after 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 your purchase price � but not when the borrower earns 22 percent equity. (A number of "higher risk" loans are not included.) However, you can actually cancel PMI yourself (for loans made past July 1999) when your equity rises to 20 percent, without consideration of the original price of purchase.
Study your loan statements often. Also keep track of the price that other homes are purchased for in your neighborhood. If your mortgage is under five years old, it's likely you haven't paid down much principal � you have paid mostly interest.
At the point your equity has risen to the required twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will need to contact your lender to alert them that you wish to cancel PMI. The lending institution will ask for proof that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lending institutions request one before they agree to cancel.
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