For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls lower than 78 percent of your purchase price � but not at the point the borrower achieves 22 percent equity. (There are some loans that are not included -like some loans considered 'high risk'.) The good news is that you can cancel your PMI yourself (for a loan closing after July '99), regardless of the original purchase price, when your equity climbs to twenty percent.
Familiarize yourself with your monthly statements to keep track of principal payments. You'll want to keep track of the the purchase prices of the homes that sell around you. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't started to pay a lot of the principal: you are paying mostly interest.
At the point you think you have achieved at least 20 percent equity, you can start the process of freeing yourself from PMI payments. First you will notify your lender that you are asking to cancel your PMI. Lenders ask for proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably require one before they agree to cancel PMI.
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