For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (The law does not cover certain higher risk mortgages.) But if your equity rises to 20% (no matter what the original purchase price was), you have the legal right to cancel PMI (for a mortgage loan closed after July 1999).
Keep a running total of your principal payments. Find out the selling prices of other houses in your neighborhood. If your mortgage is fewer than five years old, probably you haven't greatly reduced principal � it's been mostly interest.
At the point your equity has reached the desired twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. Call your lending institution to request cancellation of PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and most lenders will require one before they agree to cancel PMI.
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