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 falls below 78 percent of your purchase amount � but not when the borrower achieves 22 percent equity. (Certain "higher risk" morgages are excluded.) The good news is that you can cancel your PMI yourself (for your loan closing after July '99), no matter the original price of purchase, when your equity climbs to twenty percent.
Analyze your monthly statements often. Also stay aware of how much other homes are purchased for in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or under, you likely haven't begun to pay very much of the principal: you have been paying mostly interest.
When you determine you've reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. Call your mortgage lender to request cancellation of PMI. Next, you will be asked to verify that you have at least 20 percent equity. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.
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