For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase price � but not at the point the borrower achieves 22 percent equity. (The law does not include certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed after July '99), no matter the original purchase price, at the point your equity rises to twenty percent.
Keep track of money going toward the principal. Find out the purchase prices of other homes in your immediate area. If your loan is fewer than five years old, chances are you haven't greatly reduced principal � you have paid mostly interest.
When you find you have achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. Contact the lending institution to ask for cancellation of PMI. Lenders ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably require one before they agree to cancel.
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