For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (A number of "higher risk" loan programs are not included.) However, you have the right to cancel PMI yourself (for mortgage loans closed after July 1999) once your equity gets to 20 percent, regardless of the original price of purchase.
Keep a running total of money going toward the principal. You'll want to stay aware of the the purchase amounts of the houses that are selling in your neighborhood. If your loan is under five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
You can start the process of canceling PMI at the time you you think that your equity reaches 20%. Call the mortgage lender to ask for cancellation of PMI. Next, you will be asked to verify that you have at least 20 percent equity. You can get proof of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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