For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of your purchase price � but not when the borrower achieves 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for your mortgage loan closing past July '99), regardless of the original price of purchase, when your equity gets to twenty percent.
Study your mortgage statements often. Also keep track of what other homes are purchased for in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you likely haven't been able to pay very much of the principal: you have been paying mostly interest.
Once you determine you've achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you wish to cancel PMI payments. Next, you will be required to verify that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel PMI.
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