For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (Some "higher risk" mortgage loans are not included.) The good news is that you can request cancelation of your PMI yourself (for your loan closing past July '99), no matter the original price of purchase, when the equity reaches twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Also keep track of the price that other homes are purchased for in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal most likely hasn't lowered much.
Once your equity has reached the desired twenty percent, you are not far away from stopping your PMI payments, for the life of your loan. First you will tell your lender that you are asking to cancel PMI. Lending institutions request proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably require one before they agree to cancel PMI.
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