For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for your mortgage loan closing past July '99), without considering the original price of purchase, when the equity rises to twenty percent.
Keep a running total of your principal payments. You'll want to stay aware of the the purchase amounts of the houses that sell in your neighborhood. Unfortunately, if you have a new loan - five years or under, you probably haven't started to pay very much of the principal: you are paying mostly interest.
You can start the process of canceling PMI as soon as you're sure your equity has reached 20%. You will first notify your lender that you are asking to cancel PMI. Then you will be asked to submit proof that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably require one before they'll cancel PMI.
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