For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase price � but not when the borrower achieves 22 percent equity. (Certain "higher risk" morgages are not included.) The good news is that you can request cancelation of your PMI yourself (for your loan closing past July '99), without considering the original purchase price, once your equity gets to twenty percent.
Familiarize yourself with your loan statements to keep track of principal payments. Also stay aware of what other homes are being sold for in your neighborhood. If your loan 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 your equity has risen to the required twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. Contact your mortgage lender to ask for cancellation of PMI. Lenders require paperwork verifying your eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
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