For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets under 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (The legal requirment does not cover a number of higher risk mortgages.) However, if your equity reaches 20% (regardless of the original price of purchase), you are able to cancel the PMI (for a mortgage that after July 1999).
Keep track of your principal payments. You'll want to stay aware of the the purchase amounts of the homes that are selling in your neighborhood. If your loan is under five years old, it's likely you haven't paid down much principal � you have paid mostly interest.
You can start the process of canceling your PMI as soon as you're sure your equity reaches 20%. Contact the mortgage lender to request cancellation of PMI. Lenders require proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel PMI.
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