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. (There are some exceptions -like a number of "high risk' loans.) But you can actually cancel PMI yourself (for mortgages closed after July 1999) once your equity rises to 20 percent, regardless of the original price of purchase.
Familiarize yourself with your loan statements to keep track of principal payments. Pay attention to the selling prices of other homes in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
At the point your equity has risen to the required twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. You will first notify your lender that you are asking to cancel PMI. Your lender will request proof that your equity is at 20 percent or above. You can get documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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