For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (The legal obligation does not apply to certain higher risk mortgages.) However, if your equity reaches 20% (regardless of the original price of purchase), you are able to cancel PMI (for a mortgage loan that after July 1999).
Keep track of money going toward the principal. Also keep track of how much other homes are being sold for in your neighborhood. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't lowered much.
Once your equity has risen to the magic number of twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. First you will notify your lender that you are asking to cancel PMI. The lending institution will request documentation that your equity is high enough. 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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