For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of your purchase price � but not when the borrower earns 22 percent equity. (The legal obligation does not cover a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgages closed after July 1999) at the point your equity rises to 20 percent, no matter the original purchase price.
Familiarize yourself with your mortgage statements to keep track of principal payments. Pay attention to the prices of other homes in your immediate area. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal most likely hasn't lowered much.
When you find you've achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be asked to submit documentation that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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