For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase price � but not when the borrower achieves 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing after July '99), regardless of the original price of purchase, once your equity climbs to twenty percent.
Keep track of your principal payments. Also keep track of how much other homes are purchased 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.
You can begin the process of PMI cancelation when you calculate that your equity reaches 20%. Call the mortgage lender to ask for cancellation of your PMI. Then you will be asked to verify that you have at least 20 percent equity. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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