For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets under 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan that closed past July '99), no matter the original purchase price, when the equity rises to twenty percent.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Also stay aware of how much other homes are being sold for in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or fewer, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.
At the point your equity has risen to the magic number of twenty percent, you are not far away from canceling your PMI payments, once and for all. You will need to call your mortgage lender to alert them that you wish to cancel PMI. Your lender will ask for documentation that your equity is high enough. Usually lenders require 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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