For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (There are some loans that are not included -like some "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for a loan that closed past July '99), without considering the original price of purchase, at the point your equity climbs to twenty percent.
Analyze your statements often. Make yourself aware of the prices of other houses in your immediate area. Unfortunately, if you have a new mortgage - five years or fewer, you likely haven't been able to pay a lot of the principal: you have been paying mostly interest.
When you think you've reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. Contact the lender to ask for cancellation of PMI. The lending institution will request proof that your equity is high enough. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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