For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase amount � but not when the borrower achieves 22 percent equity. (Some "higher risk" loans are excluded.) But you have the right to cancel PMI yourself (for loans made after July 1999) when your equity rises to 20 percent, regardless of the original price of purchase.
Review your statements often. You'll want to keep track of the the purchase prices of the homes that sell in your neighborhood. If your loan is under five years old, chances are you haven't greatly reduced principal � it's been mostly interest.
You can begin the process of canceling your PMI when you determine your equity reaches 20%. Contact the mortgage lender to request cancellation of PMI. The lending institution will ask for proof 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 your lender will probably require one before they agree to cancel PMI.
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