For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (There are some loans that are excluded -like some loans considered 'high risk'.) But you can actually cancel PMI yourself (for mortgages closed after July 1999) at the point your equity gets to 20 percent, without consideration of the original price of purchase.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. Make yourself aware of the selling prices of other houses in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you likely haven't started to pay a lot of the principal: you have been paying mostly interest.
Once your equity has reached the desired twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. Call the mortgage lender to request cancellation of your Private Mortgage Insurance. Lending institutions require paperwork verifying your eligibility at this point. You can get proof of your home's equity by getting 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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