While lending institutions have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance gets below 78% of the purchase price, they do not have to take similar action if the loan's equity is above 22%. (This legal requirment does not cover a number of higher risk mortgages.) But you are able to cancel PMI yourself (for mortgages made past July 1999) once your equity gets to 20 percent, no matter the original purchase price.
Familiarize yourself with your monthly statements to keep track of principal payments. Also be aware of the price that other homes are purchased for in your neighborhood. If your loan is under five years old, it's likely you haven't paid down much principal � it's been mostly interest.
At the point your equity has reached the magic number of twenty percent, you are not far away from canceling your PMI payments, for the life of your loan. You will first let your lender know that you are asking to cancel PMI. Next, you will be asked to submit documentation that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and almost all lenders will require one before they agree to cancel PMI.
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