For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (Certain "higher risk" mortgage loans are excluded.) However, if your equity gets to 20% (regardless of the original purchase price), you have the right to cancel the PMI (for a loan closed after July 1999).
Keep track of money going toward the principal. Also keep track of how much other homes are selling for in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you probably haven't started to pay very much of the principal: you are paying mostly interest.
When you find you've reached 20 percent equity, you can start the process of freeing yourself from PMI payments. First you will tell your lender that you are requesting to cancel your PMI. The lending institution will require proof that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably request one before they'll cancel PMI.
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