While lenders have been required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance dips under 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is over 22%. (Certain "higher risk" morgages are not included.) However, you can actually cancel PMI yourself (for loans made past July 1999) at the point your equity reaches 20 percent, no matter the original purchase price.
Analyze your statements often. You'll want to be aware of the the purchase amounts of the houses that are selling around you. Unfortunately, if you have a new mortgage - five years or fewer, you probably haven't had a chance to pay a lot of the principal: you are paying mostly interest.
Once you find you've reached 20 percent equity, you can start the process of freeing yourself from PMI payments. Contact the lending institution to request cancellation of your PMI. Next, you will be asked to submit proof that you have at least 20 percent equity. Most lenders ask for 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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