For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed past July '99), regardless of the original purchase price, when your equity rises to twenty percent.
Familiarize yourself with your loan statements to keep your eye on principal payments. Also keep track of what other homes are selling for in your neighborhood. If your loan is under five years old, probably you haven't paid down much principal � it's been mostly interest.
You can begin the process of PMI cancelation when you you think that your equity has risen to 20%. Call the lending institution to request cancellation of your Private Mortgage Insurance. The lending institution will require proof that your equity is high enough. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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