For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (This legal obligation does not cover certain higher risk mortgages.) However, you are able to cancel PMI yourself (for loans closed past July 1999) when your equity gets to 20 percent, without consideration of the original price of purchase.
Study your monthly statements often. You'll want to be aware of the the purchase prices of the homes that are selling around you. If your mortgage is fewer than five years old, probably you haven't greatly reduced principal � you have paid mostly interest.
At the point your equity has reached the desired twenty percent, you are not far away from canceling your PMI payments, once and for all. Call your lending institution to request cancellation of your PMI. Your lender will request documentation 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 PMI cancellation.
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