Although lending institutions have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance goes below 78% of the price of purchase, they do not have to cancel automatically if the borrower's equity is above 22%. (The legal obligation does not cover certain higher risk mortgages.) But if your equity reaches 20% (regardless of the original price of purchase), you can cancel PMI (for a mortgage that after July 1999).
Analyze your statements often. You'll want to be aware of the prices of the houses that sell in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or under, you likely haven't started to pay a lot of the principal: you are paying mostly interest.
Once your equity has reached the required twenty percent, you are just a few steps away from stopping your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI. Then you will be asked to submit proof that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably request one before they agree to cancel.
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