For loans closed 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 the purchase amount � but not at the point the loan reaches 22 percent equity. (The legal obligation does not cover a number of higher risk mortgages.) But if your equity rises to 20% (regardless of the original price of purchase), you have the right to cancel your PMI (for a mortgage loan closed past July 1999).
Analyze your statements often. Also stay aware of the price that other homes are being sold for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't paid down much principal � you have paid mostly interest.
Once you determine you have achieved at least 20 percent equity, you can start the process of getting PMI out of your budget. Call your lending institution to ask for cancellation of your PMI. Next, you will be required to submit documentation that you are eligible to cancel. Usually 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 canceling PMI.
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