For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (There are some loans that are not covered by this law -like certain "high risk' loans.) However, you are able to cancel PMI yourself (for mortgage loans made past July 1999) when your equity reaches 20 percent, regardless of the original price of purchase.
Keep a running total of your principal payments. You'll want to keep track of the the purchase amounts of the houses that sell around you. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't been able to pay a lot of the principal: you have been paying mostly interest.
Once your equity has reached the required 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. Next, you will be required to submit proof that you have at least 20 percent equity. You can get proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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