For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of the purchase price � but not when the borrower earns 22 percent equity. (This legal requirment does not cover certain higher risk mortgages.) However, if your equity reaches 20% (regardless of the original purchase price), you are able to cancel your PMI (for a mortgage that past July 1999).
Review your mortgage statements often. Find out the selling prices of other houses in your immediate area. If your loan is fewer than five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
You can start the process of PMI cancelation as soon as you determine your equity has reached 20%. Call the lender to ask for cancellation of your Private Mortgage Insurance. The lending institution will request documentation that your equity is at 20 percent or above. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and almost all lenders request one before they agree to cancel.
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