For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (Certain "higher risk" loans are excluded.) However, if your equity rises to 20% (no matter what the original price was), you have the right to cancel your PMI (for a mortgage that past July 1999).
Keep track of each principal payment. You'll want to keep track of the the purchase prices of the homes that are selling in your neighborhood. Unfortunately, if yours is a new mortgage - five years or under, you probably haven't begun to pay much of the principal: you are paying mostly interest.
At the point your equity has reached the magic number of twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will first let your lender know that you are asking to cancel your PMI. Next, you will be required to verify that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably require one before they agree to cancel PMI.
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