While lenders have been obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78% of the price of purchase, they do not have to cancel automatically if the equity is over 22%. (This law does not include certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed after July '99), no matter the original purchase price, at the point your equity gets to twenty percent.
Keep track of your principal payments. Also keep track of what other homes are being sold for in your neighborhood. If your loan is fewer than five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
As soon as your equity has reached the desired twenty percent, you are close to canceling your PMI payments, for the life of your loan. You will need to notify your mortgage lender that you wish to cancel PMI. Next, you will be required to verify that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they agree to cancel.
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