For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase price � but not at the point the borrower achieves 22 percent equity. (Certain "higher risk" loan programs are excluded.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), regardless of the original price of purchase, once your equity climbs to twenty percent.
Study your monthly statements often. Pay attention to the purchase prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage loan - five years or fewer, you probably haven't been able to pay very much of the principal: you are paying mostly interest.
You can start the process of PMI cancelation as soon as you calculate that your equity has reached 20%. First you will let your lending institution know that you are requesting to cancel your PMI. Your lender will require documentation that your equity is at 20 percent or above. 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 canceling PMI.
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