For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of the purchase price � but not at the point the borrower earns 22 percent equity. (There are some exceptions -like a number of "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your loan closing after July '99), no matter the original price of purchase, when your equity reaches twenty percent.
Analyze your loan statements often. You'll want to keep track of the prices of the houses that are selling in your neighborhood. If your loan is fewer than five years old, it's likely you haven't paid down much principal � it's been mostly interest.
You can start the process of PMI cancelation as soon as you're sure your equity has reached 20%. You will need to call the mortgage lender to alert them that you wish to cancel PMI. The lending institution will request documentation that your equity is high enough. 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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