For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase amount � but not when the borrower achieves 22 percent equity. (The legal obligation does not cover certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your loan closing after July '99), regardless of the original price of purchase, once the equity reaches twenty percent.
Analyze your statements often. Pay attention to the selling prices of other houses in your immediate area. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.
You can begin the process of PMI cancelation when you're sure your equity reaches 20%. Call the mortgage lender to request cancellation of your Private Mortgage Insurance. Lending institutions ask for proof of eligibility at this point. You can acquire documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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