While lending institutions have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the mortgage balance goes under 78% of the purchase price, they do not have to cancel PMI automatically if the equity is more than 22%. (There are some exceptions -like certain "high risk' loans.) However, if your equity reaches 20% (no matter what the original price was), you are able to cancel PMI (for a loan closed after July 1999).
Keep a running total of money going toward the principal. Also keep track of how much other homes are being sold for in your neighborhood. If your loan is fewer than five years old, probably you haven't greatly reduced principal � you have paid mostly interest.
At the point your equity has reached the magic number of twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. First you will let your lending institution know that you are requesting to cancel PMI. The lending institution will ask for proof that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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