For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of your purchase amount � but not at the point the borrower earns 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) But if your equity gets to 20% (no matter what the original purchase price was), you have the legal right to cancel the PMI (for a loan that past July 1999).
Keep track of each principal payment. Find out the selling prices of other homes in your immediate area. Unfortunately, if you have a new mortgage - five years or under, you likely haven't had a chance to pay very much of the principal: you have been paying mostly interest.
At the point you find you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will first notify your lender that you are asking to cancel PMI. Then you will be asked to submit documentation that you are eligible to cancel. You can get documentation of your equity by getting 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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