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 falls below 78 percent of your purchase price � but not at the point the borrower achieves 22 percent equity. (Some "higher risk" loan programs are not included.) However, you are able to cancel PMI yourself (for mortgages closed past July 1999) at the point your equity reaches 20 percent, without consideration of the original price of purchase.
Keep a running total of each principal payment. Also stay aware of the price that other homes are being sold for in your neighborhood. Unfortunately, if you have a new loan - five years or fewer, you likely haven't started to pay a lot of the principal: you have been paying mostly interest.
As soon as your equity has reached the required twenty percent, you are not far away from canceling your PMI payments, for the life of your loan. Contact your lender to request cancellation of PMI. Your lender will request documentation that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and almost all lenders will require one before they'll cancel PMI.
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