For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of your purchase price � but not at the point the borrower achieves 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) But if your equity rises to 20% (no matter what the original price was), you are able to cancel the PMI (for a mortgage closed after July 1999).
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also stay aware of the price that other homes are purchased for in your neighborhood. If your loan is under five years old, it's likely you haven't paid down much principal � you have paid mostly interest.
You can start the process of PMI cancelation when you're sure your equity reaches 20%. First you will notify your lender that you are requesting to cancel PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and most lending institutions will require one before they agree to cancel.
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