For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (There are some loans that are excluded -like some "high risk' loans.) But you are able to cancel PMI yourself (for mortgage loans closed after July 1999) at the point your equity reaches 20 percent, without consideration of the original purchase price.
Keep a running total of each principal payment. You'll want to keep track of the the purchase prices of the houses that are selling around you. Unfortunately, if you have a new mortgage - five years or fewer, you probably haven't been able to pay much of the principal: you have been paying mostly interest.
Once you determine you have 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 PMI. Next, you will be asked to verify that you are eligible to cancel. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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