For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase price � but not when the borrower achieves 22 percent equity. (Some "higher risk" loans are not included.) But if your equity rises to 20% (regardless of the original price of purchase), you can cancel PMI (for a loan closed after July 1999).
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Make yourself aware of the selling prices of other homes in your immediate area. Unfortunately, if yours is a new loan - five years or under, you probably haven't started to pay a lot of the principal: you are paying mostly interest.
You can begin the process of canceling your PMI at the time you calculate that your equity has reached 20%. First you will tell your lender that you are requesting to cancel PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.
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