For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls lower than 78 percent of your purchase price � but not at the point the borrower earns 22 percent equity. (There are exceptions -like some "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed after July '99), regardless of the original purchase price, once your equity rises to twenty percent.
Familiarize yourself with your loan statements to keep track of principal payments. Also keep track of what other homes are being sold for in your neighborhood. If your loan is fewer than five years old, probably you haven't made much progress with the principal � you have been paying mostly interest.
At the point you think you've reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. First you will tell your lender that you are asking to cancel 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 home's equity and eligibility for canceling PMI.
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