For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (There are some loans that are excluded -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), regardless of the original price of purchase, after your equity climbs to twenty percent.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. You'll want to be aware of the the purchase amounts of the homes that sell around you. You are paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't lowered much.
At the point your equity has reached the desired twenty percent, you are close to stopping your PMI payments, once and for all. First you will tell your lender that you are requesting to cancel your PMI. Then you will be required to submit proof that you are eligible to cancel. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and most lenders request one before they agree to cancel PMI.
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