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 falls below 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (The law does not apply to a number of higher risk mortgages.) However, if your equity rises to 20% (regardless of the original price of purchase), you are able to cancel PMI (for a mortgage that after July 1999).
Keep a running total of your principal payments. Find out the selling prices of other houses in your neighborhood. If your loan is fewer than five years old, it's likely you haven't paid down much principal � it's been mostly interest.
When you find you've reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. You will need to contact your lending institution to let them know that you wish to cancel PMI payments. Lenders request paperwork verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably require one before they agree to cancel.
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