For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets under 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (This law does not include some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your mortgage loan closing past July '99), no matter the original purchase price, when your equity reaches twenty percent.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. Pay attention to the prices of other homes in your neighborhood. If your loan is fewer than five years old, it's likely you haven't paid down much principal � you have paid mostly interest.
Once your equity has reached the magic number of twenty percent, you are not far away from getting rid of your PMI payments, once and for all. First you will let your lending institution know that you are requesting to cancel your PMI. Lenders request proof of eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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