For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (A number of "higher risk" morgages are excluded.) The good news is that you can request cancelation of your PMI yourself (for a loan closing past July '99), regardless of the original price of purchase, at the point your equity reaches twenty percent.
Study your monthly statements often. Find out the prices of other houses in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't gone down much.
You can begin the process of PMI cancelation as soon as you calculate that your equity has reached 20%. First you will let your lender know that you are requesting to cancel PMI. Then you will be asked to verify that you are eligible to cancel. You can acquire proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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