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 goes lower than 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (This legal requirment does not cover certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), without considering the original price of purchase, once the equity climbs to twenty percent.
Study your statements often. Also keep track of how much other homes are purchased for in your neighborhood. Unfortunately, if you have a new loan - five years or fewer, you probably haven't been able to pay a lot of the principal: you have been paying mostly interest.
You can begin the process of canceling your PMI as soon as you determine your equity reaches 20%. You will need to contact the lending institution to let them know that you wish to cancel PMI. Lenders require proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lenders will require one before they agree to cancel.
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