For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (Certain "higher risk" loans are excluded.) However, you can actually cancel PMI yourself (for loans made past July 1999) at the point your equity rises to 20 percent, no matter the original purchase price.
Keep a running total of money going toward the principal. You'll want to keep track of the prices of the homes that sell around you. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
At the point your equity has reached the magic number of twenty percent, you are close to getting rid of your PMI payments, once and for all. You will first notify your lender that you are requesting to cancel your PMI. Next, you will be asked to submit proof that you have at least 20 percent equity. 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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