For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls under 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (The law does not include a number of higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your loan closing past July '99), without considering the original price of purchase, after your equity gets to twenty percent.
Study your loan statements often. Pay attention to the purchase prices of other homes in your immediate area. Unfortunately, if yours is a recent loan - five years or under, you probably haven't been able to pay very much of the principal: you are paying mostly interest.
At the point your equity has risen to the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. First you will tell your lender that you are asking to cancel your PMI. Next, you will be asked to submit proof that you are eligible to cancel. Most 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 PMI cancellation.
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