Although lenders have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the balance dips under 78% of the price of purchase, they do not have to cancel automatically if the loan's equity is more than 22%. (The legal requirment does not include a number of higher risk mortgages.) But if your equity gets to 20% (no matter what the original price was), you have the right to cancel the PMI (for a loan closed past July 1999).
Analyze your statements often. Also stay aware of the price that other homes are being sold for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't paid down much principal � it's been mostly interest.
Once your equity has risen to the desired twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be asked to submit documentation that you have at least 20 percent equity. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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