For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of your purchase price � but not when the borrower achieves 22 percent equity. (This legal requirment does not apply to a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your loan that closed past July '99), without considering the original price of purchase, once your equity reaches twenty percent.
Review your statements often. Also keep track of the price that other homes are selling for in your neighborhood. If your mortgage is under five years old, it's likely you haven't paid down much principal � it's been mostly interest.
As soon as your equity has reached the required twenty percent, you are not far away from stopping your PMI payments, once and for all. Call the lender to ask for cancellation of PMI. The lending institution will require documentation that your equity is at 20 percent or above. Usually lenders ask for 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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