For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase price � but not when the borrower achieves 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 purchase price, once the equity rises to twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. Find out the selling prices of other houses in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
As soon as your equity has reached the desired twenty percent, you are close to stopping your PMI payments, once and for all. First you will let your lender know that you are asking to cancel PMI. The lending institution will request documentation that your equity is at 20 percent or above. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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