For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (This law does not cover a number of higher risk mortgages.) However, you can actually cancel PMI yourself (for mortgage loans made after July 1999) at the point your equity gets to 20 percent, without consideration of the original purchase price.
Keep a running total of each principal payment. Pay attention to the purchase prices of other homes in your immediate area. Unfortunately, if yours is a recent mortgage - five years or fewer, you likely haven't started to pay very much of the principal: you are paying mostly interest.
When you find you've achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to contact the lending institution to alert them that you wish to cancel PMI. Your lender will ask for documentation that your equity is at 20 percent or above. You can acquire documentation of your home's 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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