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 gets below 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (This legal obligation does not include some higher risk mortgages.) But you can actually cancel PMI yourself (for mortgage loans made after July 1999) at the point your equity reaches 20 percent, without consideration of the original purchase price.
Analyze your loan statements often. Also keep track of the price that other homes are being sold for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't greatly reduced principal � you have been paying mostly interest.
You can begin the process of PMI cancelation as soon as you're sure your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lenders require proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and most lenders request one before they'll cancel PMI.
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