For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (Certain "higher risk" mortgage loans are not included.) However, if your equity reaches 20% (regardless of the original price of purchase), you have the legal right to cancel your PMI (for a mortgage that past July 1999).
Familiarize yourself with your mortgage statements to keep track of principal payments. Also be aware of what other homes are selling for in your neighborhood. Unfortunately, if you have a recent loan - five years or fewer, you likely haven't begun to pay much of the principal: you are paying mostly interest.
Once you determine you've reached 20 percent equity, you can start the process of getting PMI out of your budget. Call the lending institution to ask for cancellation of your PMI. The lending institution will request proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they'll cancel PMI.
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