For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for a loan that closed past July '99), no matter the original purchase price, after your equity reaches twenty percent.
Keep track of money going toward the principal. Find out the prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
You can begin the process of canceling your PMI as soon as you're sure your equity has reached 20%. You will first notify your lender that you are asking to cancel PMI. Then you will be asked 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 verify your equity and eligibility for PMI cancellation.
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