For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of your purchase amount � but not at the point the borrower earns 22 percent equity. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) But if your equity reaches 20% (regardless of the original price of purchase), you can cancel the PMI (for a mortgage closed past July 1999).
Keep track of your principal payments. You'll want to be aware of the prices of the houses that sell around you. Unfortunately, if you have a recent loan - five years or under, you likely haven't had a chance to pay a lot of the principal: you are paying mostly interest.
At the point you determine you've achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. Call your lending institution to request cancellation of PMI. The lending institution will ask for proof that your equity is at 20 percent or above. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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