For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (There are some exceptions -like a number of "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed past July '99), regardless of the original purchase price, once the equity gets to twenty percent.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. Also be aware of the price that other homes are being sold for in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal most likely hasn't lowered much.
Once your equity has reached the desired twenty percent, you are just a few steps away from stopping your PMI payments, once and for all. Contact the mortgage lender to ask for cancellation of PMI. Your lender will require 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 determine your equity and eligibility for canceling PMI.
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