Although lenders have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes under 78% of the purchase price, they do not have to cancel automatically if the equity is above 22%. (The law does not cover a number of higher risk mortgages.) However, if your equity rises to 20% (no matter what the original price was), you can cancel PMI (for a loan that after July 1999).
Review your monthly statements often. You'll want to be aware of the the purchase amounts of the homes that sell in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you probably haven't begun to pay a lot of the principal: you have been paying mostly interest.
You can begin the process of PMI cancelation as soon as you you think that your equity has reached 20%. You will first let your lender know that you are requesting to cancel PMI. Your lender will ask for proof that your equity is high enough. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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