For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase price � but not at the point the borrower achieves 22 percent equity. (The law does not apply to some higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed past July '99), no matter the original purchase price, once your equity gets to twenty percent.
Study your mortgage statements often. Find out the purchase prices of other houses in your neighborhood. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal probably hasn't lowered much.
You can begin the process of PMI cancelation at the time you calculate that your equity has reached 20%. First you will let your lender know that you are requesting to cancel PMI. The lending institution will ask for documentation that your equity is high enough. Usually lenders require 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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