For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (Some "higher risk" mortgage loans are not included.) But if your equity reaches 20% (no matter what the original price was), you are able to cancel PMI (for a mortgage loan closed after July 1999).
Review your statements often. You'll want to keep track of the prices of the houses that sell in your neighborhood. If your mortgage is under five years old, probably you haven't paid down much principal � you have been paying mostly interest.
When you think you have achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to contact your mortgage lender to alert them that you wish to cancel PMI. Then you will be required to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably request one before they agree to cancel PMI.
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