For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (The legal obligation does not include some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage closing past July '99), without considering the original price of purchase, once your equity climbs to twenty percent.
Study your mortgage statements often. Pay attention to the prices of other houses in your immediate area. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
As soon as your equity has risen to the magic number of twenty percent, you are just a few steps away from stopping your PMI payments, once and for all. You will first notify your lender that you are asking to cancel PMI. Next, you will be required to verify that you have at least 20 percent equity. You can acquire proof of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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