Although lenders have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the loan balance goes below 78% of the price of purchase, they do not have to cancel PMI automatically if the equity is more than 22%. (This legal requirment does not apply to some higher risk mortgages.) However, if your equity gets to 20% (regardless of the original purchase price), you can cancel PMI (for a loan closed after July 1999).
Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to stay aware of the the purchase amounts of the homes that sell in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or fewer, you likely haven't begun to pay much of the principal: you have been paying mostly interest.
As soon as your equity has risen to the desired twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. First you will notify your lender that you are asking to cancel PMI. Your lender will ask for proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel PMI.
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