For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (A number of "higher risk" morgages are excluded.) But if your equity gets to 20% (no matter what the original purchase price was), you can cancel PMI (for a loan that past July 1999).
Keep a running total of your principal payments. You'll want to keep track of the prices of the homes that sell in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.
You can begin the process of canceling your PMI when you're sure your equity has reached 20%. First you will let your lender know that you are asking to cancel your PMI. Then you will be asked to verify that you are eligible to cancel. You can acquire documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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