For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of the purchase price � but not at the point the borrower achieves 22 percent equity. (There are some loans that are not included -like a number of "high risk' loans.) But you can actually cancel PMI yourself (for loans closed past July 1999) when your equity reaches 20 percent, no matter the original purchase price.
Familiarize yourself with your loan statements to keep track of principal payments. Make yourself aware of the purchase prices of other houses in your neighborhood. Unfortunately, if yours is a new mortgage - five years or under, you probably haven't had a chance to pay much of the principal: you are paying mostly interest.
At the point your equity has risen to the desired twenty percent, you are close to canceling your PMI payments, for the life of your loan. First you will let your lender know that you are asking to cancel your PMI. Then you will be asked to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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