For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (The law does not include some higher risk mortgages.) But if your equity rises to 20% (no matter what the original purchase price was), you can cancel PMI (for a loan closed after July 1999).
Familiarize yourself with your monthly statements to keep your eye on principal payments. Pay attention to the prices of other homes in your neighborhood. Unfortunately, if yours is a new mortgage loan - five years or under, you likely haven't been able to pay very much of the principal: you are paying mostly interest.
You can start the process of canceling PMI at the time you calculate that your equity has risen to 20%. First you will tell your lender that you are asking to cancel PMI. Lending institutions require paperwork verifying your eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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