For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (The legal obligation does not include some higher risk mortgages.) However, if your equity gets to 20% (no matter what the original price was), you can cancel your PMI (for a loan closed past July 1999).
Review your loan statements often. You'll want to keep track of the the purchase prices of the houses that are selling in your neighborhood. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
Once your equity has reached the magic number of twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. You will first let your lending institution know that you are requesting to cancel your PMI. Lending institutions request proof of eligibility at this point. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
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