For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (Certain "higher risk" loans are not included.) The good news is that you can cancel your PMI yourself (for a loan closing past July '99), without considering the original price of purchase, when the equity gets to twenty percent.
Review your statements often. Pay attention to the prices of other homes in your neighborhood. If your mortgage is fewer than five years old, probably you haven't made much progress with the principal � you have been paying mostly interest.
At the point you determine you've reached 20 percent equity, you can start the process of getting PMI out of your budget. You will need to notify your mortgage lender that you wish to cancel PMI payments. Your lender will ask for proof that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they'll cancel PMI.
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