For loans made since 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 amount � but not when the loan reaches 22 percent equity. (This law does not apply to certain higher risk mortgages.) But you can actually cancel PMI yourself (for mortgages made after July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Study your statements often. You'll want to keep track of the prices of the homes that sell in your neighborhood. If your mortgage is under five years old, it's likely you haven't made much progress with the principal � it's been mostly interest.
At the point your equity has risen to the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. First you will tell your lender that you are requesting to cancel your PMI. The lending institution will ask for documentation that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and most lending institutions will require one before they'll cancel PMI.
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