While lending institutions have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance gets under 78% of the purchase price, they do not have to cancel automatically if the borrower's equity is above 22%. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for mortgages closed past July 1999) at the point your equity gets to 20 percent, regardless of the original purchase price.
Keep a running total of your principal payments. Also stay aware of how much other homes are purchased for in your neighborhood. If your mortgage is under five years old, it's likely you haven't greatly reduced principal � you have paid mostly interest.
Once your equity has reached the magic number of twenty percent, you are just a few steps away from canceling your PMI payments, for the life of your loan. First you will tell your lender that you are asking to cancel PMI. Lending institutions ask for proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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