For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase price � but not when the borrower achieves 22 percent equity. (There are some exceptions -like certain "high risk' loans.) But if your equity rises to 20% (regardless of the original purchase price), you are able to cancel the PMI (for a loan that after July 1999).
Analyze your loan statements often. You'll want to keep track of the the purchase amounts of the houses that are selling in your neighborhood. You are paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't been reduced by much.
When you think you have achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you wish to cancel PMI payments. Next, you will be asked to submit documentation that you have at least 20 percent equity. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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