For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (Some "higher risk" loan programs are excluded.) The good news is that you can cancel your PMI yourself (for your mortgage closing past July '99), without considering the original purchase price, when your equity gets to twenty percent.
Familiarize yourself with your loan statements to keep your eye on principal payments. Also keep track of the price that other homes are being sold for in your neighborhood. You are paying mostly interest if your loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.
Once your equity has reached the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will need to contact your lending institution to let them know that you wish to cancel PMI. Lending institutions request documentation verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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