For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (There are some loans that are excluded -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your loan closing past July '99), no matter the original price of purchase, once the equity reaches twenty percent.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to keep track of the the purchase amounts of the homes that are selling around you. Unfortunately, if yours is a recent loan - five years or fewer, you likely haven't been able to pay much of the principal: you are paying mostly interest.
Once you think you have achieved at least 20 percent equity in your home, you can begin the process of getting PMI out of your budget. First you will tell your lender that you are asking to cancel PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. You can get proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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